Chinese local governments buying houses to aid property sector

SOME local governments in China are buying homes in bulk from developers or encouraging state-owned entities to do so in their latest efforts to prop up the real estate market, the Securities Times reported on Thursday (Oct 13).

The city government of Suzhou in eastern Jiangsu province plans to buy about 10,000 new units, the newspaper reported, citing market information. Jinan city in Shandong province is proposing to purchase 3,000 units to rent out, the paper reported, according to a government notice. That document was also reported by other local media but is no longer available on the government’s website.

In addition, cities including Huzhou in Zhejiang province have asked state-owned companies to buy houses from struggling developers, according to Securities Times. Huzhou made that request in August, while the local government in Tonghua city in Jilin province purchased 32.5 million yuan (S$6.5 million) worth of property from state-owned developer Poly for shantytown redevelopment, according to a government notice dated Oct 12.

Meanwhile, a prefecture in Xinjiang also encouraged state-owned enterprises to buy homes in bulk and convert them into subsidised housing, according to a government notice from late last month.

It’s unknown whether the purchases are endorsed by the central government, but governments at all levels are offering more help to try and arrest the slumping real-estate sector after mortgage-rate cuts and a flurry of relaxation measures failed to stimulate demand. China’s latest property policy package announced before the week-long holiday in October hasn’t ignited a sales turnaround, with residential transactions for the traditionally sales-friendly week plunging 38 per cent from a year earlier in 20 major cities, according to China Index Holdings.

The recent statements from the official People’s Daily newspaper praising the Covid Zero policy and arguing it must be maintained have also dampened the outlook for the property sector. In a sign of that weak outlook, domestic sales of excavators dropped almost 25 per cent in September from a year earlier, according to media reports Thursday, the 18th straight month of declines. BLOOMBERG

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