China said to plan helping rural residents buy first city homes

[BEIJING] China plans to encourage small and mid-sized cities to offer rural residents subsidies and tax cuts to buy first homes in urban areas as part of measures to trim unsold inventories, according to people familiar with the matter.

The move is aimed at easing an oversupply of housing in smaller cities, said the people, who asked not to be identified because the plan hasn't been made public. China may also consider expanding its housing providence fund to include migrant workers and small-business owners, the people said.

A rising stockpile of unsold new homes is hampering government efforts to spur investment and halt an economic slowdown. President Xi Jinping pledged in a meeting last month to "dissolve property inventories" to ensure sustainable development of the sector, a day before official data showed housing inventory jumping 14 per cent in the first 10 months of this year from a year earlier.

In China, cities operate housing providence funds where employees contribute a portion of their salary each month to the pool, which they can tap and borrow discounted loans from to buy a home.

The Finance Ministry and the National Development and Reform Commission didn't immediately respond to a faxed request for comment on the plans.

BLOOMBERG