Redevelopment target drop hits China home sales

Shanghai

SEVERAL Chinese provinces have unveiled sharply lower shantytown redevelopment targets for 2019, suggesting one key driver of home sales may be on the wane.

From Sichuan to Shanxi, targets to replace older, run-down dwellings with new, affordable housing have fallen as much as 74 per cent from 2018, Bloomberg calculations based on local government data show.

UBS Group property analyst John Lam estimates the national target may this year be pared back by 14 per cent to five million units.

Beijing's shantytown redevelopment drive had been fuelling robust demand for new residential properties over the past three years. People were often given cash handouts to buy new apartments on the private market, and such transactions may have contributed to more than one-fifth of home sales in 2017, China International Capital Corp wrote last December. Last October, China began asking local authorities to cancel cash handouts in cities where home prices had surged.

A reduction of the redevelopment targets themselves may intensify a property slowdown that's already prompted China International Capital to call a "year of recession" in 2019. BLOOMBERG