China said on Thursday it would boost available credit for unfinished housing projects to more than $500 billion, after unveiling a new set of measures to support the sector and try to revive the economy.
China said on Thursday it would increase credit available to the ailing property market and help renovate a million homes, as it unveiled a new set of measures to support the sector and try to revive the economy.
The real estate sector has long been responsible for around a quarter of gross domestic product and has enjoyed staggering growth for two decades, but a years-long slump in the housing market has battered growth as authorities set a target of around five percent by 2024 .
At a briefing on Thursday, Housing Minister Ni Hong offered new aid and said Beijing will “raise the credit scale of whitelisted projects to four trillion” yuan ($562 billion) by the end of the year.
The ‘white list’ program announced earlier this year pushes local authorities to recommend housing projects for financial support and work with banks to guarantee their completion.
“The urban real estate financing coordination mechanism should strive to whitelist all eligible real estate projects,” Ni said.
“Another million worn-out houses will be renovated,” he added. “There are many safety hazards and poor living environments in urban villages, and people are eager to renovate.”
The move, he said, would be “conducive to absorbing the existing stock of commercial housing”.
China’s leadership warned last month that the economy was plagued by “new problems” as officials unveiled a raft of stimulus measures in one of the biggest attempts to boost growth in years.
The measures included a series of interest rate cuts, easing restrictions on home buying and measures to free up cash so banks can lend more.
– Investors ‘not happy’ –
On Thursday, Beijing said it estimates that “existing mortgage rates will fall by an average of about 0.5 percentage points” as a result of these cuts.
That would save a total of 150 billion yuan in interest expenses, benefiting 50 million families and 150 million residents, according to Central Bank Deputy Governor Tao Ling.
A blistering market rally fueled by hopes of big stimulus has stalled as authorities refrained from providing a specific figure for the bailout or detailing plans.
A number of major cities have also eased restrictions on home buying in recent months – most recently this week in Chengdu, the capital of southwestern Sichuan province, and the northern port city of Tianjin.
The latest announcement comes as China prepares to release third-quarter growth figures on Friday, which are expected to be the slowest this year.
And analysts were not convinced Thursday’s briefing would do much to impact markets.
“They are still trying to walk the talk, with more noise about stabilizing the real estate market,” Stephen Innes, Managing Partner at SPI Asset Management, said in a note.
“As the briefing went on, it was clear: traders were not enthusiastic,” he said.
“Let’s face it: China’s real estate mess is not something that can be solved with a few speeches and half-baked measures,” Innes added.
Shares in Shanghai and Hong Kong rose in the morning but fell well short of earlier gains, with property companies in negative territory.
Analysts polled by AFP predict overall growth of 4.9 percent in 2024 – even worse than last year, which was the weakest in decades outside Covid-19.
Still, Beijing has said it is “confident” it will meet the five percent target.
China will publish its latest growth figures on Friday.
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