China pours billions into crisis-hit property market

Chinese authorities have introduced their most significant measures yet to tackle the ongoing crisis in the country’s property sector. These measures include reducing the required deposit for home buyers and encouraging local governments to buy unsold properties.

The challenges in China’s property market are significantly impacting the world’s second-largest economy, as this sector has been a crucial driver of growth until recently.

The People’s Bank of China (PBOC) announced the establishment of a 300 billion yuan ($41.5 billion; £32.8 billion) fund to support affordable housing. This fund aims to assist local state-owned enterprises in purchasing unsold homes, as stated by Tao Ling, a deputy governor at the central bank during a news briefing.

Earlier, Vice Premier He Lifeng instructed officials that local governments could acquire properties at “reasonable prices” and sell them as affordable housing, according to the state-run Xinhua News Agency. However, Mr. He did not provide specifics regarding the number of properties to be purchased or the duration of the initiative.

Additionally, the central bank of China effectively eliminated the minimum mortgage rate and reduced the minimum down payment for first-time home buyers from 20% to 15%. The minimum deposit for second homes was also lowered from 30% to 25%.

Data released on Friday revealed that new home prices experienced their tenth consecutive monthly decline in April, with a 0.6% decrease compared to the previous month, marking the sharpest drop since November 2014.

On a separate note, struggling Chinese developer Country Garden had a hearing adjourned to June 11 in a Hong Kong court regarding its potential liquidation.

China’s property developers have been under significant financial pressure since 2021, when authorities implemented measures to restrict borrowing for large real estate companies. Consequently, several major property developers have defaulted on their debts. In January, Evergrande, the world’s most indebted property developer, was ordered by a Hong Kong court to be liquidated.