China vows to tackle property crunch with city-specific policies

[BEIJING] Chinese officials pledged to stabilise the real estate sector at a crucial political meeting, but stopped short of announcing major policies some economists think are needed to turn around a yearslong slump.

The central government will use city-specific policies to “control new supply and reduce inventory”, according to a government work report to the national parliament on Thursday (Mar 5).

Policymakers will also explore multiple ways to revitalise the existing housing stock, the statement said. They further repeated a vow to encourage the acquisition of existing housing inventory, primarily for use in affordable housing.

The readout reiterated much of Beijing’s rhetoric on bringing an end to the property crunch, but it also showed that policymakers are not willing to announce sweeping stimulus at a time when the economy is losing steam. At the same meeting, the government set an economic growth target of 4.5 to 5 per cent for this year, the least ambitious goal since 1991.

Despite the slump, real estate is likely to represent around 17 per cent of China’s economic output this year, according to Bloomberg Intelligence, a sign of how important it is for Beijing to stem the pain.

The financial hub of Shanghai eased homebuying rules last month, allowing more non-residents to purchase homes in its urban zones. Beijing’s local government further relaxed rules for non-resident homebuyers in December.

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China’s more than US$1 trillion new home market remains fragile, with sales value nationwide down more than half last year from its 2021 peak. The property crisis has triggered about US$130 billion in defaults, including the collapse of China Evergrande Group, once the country’s biggest developer.

Some analysts think there is more pain to come. Home prices will keep falling for at least two more years, John Lam, UBS Group’s head of China property research, said late last year. He said that the values of used homes in major cities have dropped more than a third from their peak levels. BLOOMBERG