China has unveiled a series of initiatives to rejuvenate its struggling property sector following a significant drop in housing prices of nearly 10% since the beginning of the year. The central bank has announced plans to lower the minimum down payment for mortgages and eliminate interest rate floors for first and second homes.
The housing market in China has been in decline since a crackdown on excessive borrowing by property developers a few years ago, impacting various related industries such as home furnishing, appliances, and construction, and slowing down the country's economic growth.
Many developers have faced financial difficulties, leading to defaults on debts and numerous unfinished projects across urban areas in China.
Government officials have pledged to introduce tailored policies for each city to address the challenges posed by unfinished commercial housing projects and ensure the delivery of guaranteed housing units.
Efforts to stimulate home purchases have intensified, with interest rate cuts and government-backed financing proving insufficient to attract buyers amidst concerns about developers' ability to deliver promised housing units.
The People's Bank of China has announced interest rate reductions for first-time housing provident fund loans, aiming to make home purchases more affordable for residents. Additionally, minimum down payment requirements for first and second homes have been lowered to historic lows.
Experts believe that these measures will likely boost market sentiment and encourage more families to consider buying homes, ultimately stabilizing the real estate sector.
Authorities are also exploring strategies such as local governments purchasing unsold apartments to be rented out as affordable housing, with a significant fund being set up to support these initiatives.
Despite a 5.3% economic growth rate in the first quarter of the year, concerns remain about weak domestic demand and signs of economic fragility. The government is considering further steps to revitalize the property industry and strengthen the foundation for economic recovery.
While factory output and investment in fixed assets have shown positive growth, housing starts, sales, and financing for property projects have experienced declines. Retail sales have also been sluggish, prompting officials to implement policies to stimulate consumer spending.
As China navigates challenges in its property market and broader economy, policymakers are focused on implementing effective measures to support growth and address existing risks and vulnerabilities.
