China’s call for ‘open mind’ spurs hope of new housing measures

CHINA urged officials to keep an “open mind” over policies to reduce housing inventory, a signal that led Wall Street economists to predict new measures and additional funding in Beijing’s bid to shore up the market.

The State Council, the country’s Cabinet, asked officials to keep formulating new policies that will absorb existing housing stock and stabilise markets, according to a statement posted on the government’s website late last Friday (Jun 7) before the start of a three-day public holiday. “We should steadily and concretely push forward the work of digesting and revitalising existing homes and land with an open mind and broadened thinking,” it said.

Beijing last month unveiled a real estate rescue package to address the biggest cloud over China’s economy, relaxing mortgage rules and encouraging local governments to buy unsold homes. Many investors and analysts remain sceptical that the measures will be sufficient. They point to the limited central bank funds earmarked for the purchases – 300 billion yuan (S$55.9 billion) – as well as evidence from trial programmes in several cities, where progress has apparently been slow.

“Our interpretation is that the impact of the latest round of easing thus far may have been more muted than policymakers had expected,” Goldman Sachs Group economist Hui Shan wrote in a Sunday note about the Cabinet statement. “If the property market still does not show more signs of improvements in the coming months, we think policymakers will likely introduce more funding and new measures to destock inventories and stabilise prices.” 

The State Council’s reference to the need for open minds and broadened thinking could encourage local governments to be more creative and bold in rolling out supportive measures, JPMorgan Chase & Co analyst Karl Chan wrote in a note. He expects stronger measures such as further easing of restrictions on home purchases restrictions, and relaxation of price caps in central areas of China’s biggest and most expensive cities, if sales in June and July disappoint.

Investors are yet to be convinced that the housing slump has reached a turning point. Shares of Chinese developers fell as much as 2.7 per cent on Tuesday, sliding further into a bear market. Dexin China Holdings on Tuesday became the latest builder to fall victim to financial woes when it was ordered into liquidation after losing a court case in Hong Kong.