Posted on 28 Aug 2024
More than 60 cities in China have introduced policies allowing local state-owned enterprises (SOEs) to purchase unsold properties from real estate developers, indicating potential relief for the country's housing inventory pressures and the financial strains on developers, Mysteel Global has learned.
This May in an effort to support the country's vast real estate sector, China's central government had rolled out a slew of stimulus measures, including the central bank's establishment of a Yuan 300 billion ($42 billion) re-lending loan facility for affordable housing, as reported. This serves as a funding source for SOEs to buy completed commercial houses.
For example, state-owned Wuhan Anjia Indemnificatory Housing Co has agreed to buy over 20,000 sq m of residential housing from Shenzhen-based real estate firm China Merchants Shekou Industrial Zone Holdings using the re-lending loan, marking the first such transaction in the city, according to a release from Wuhan Municipal Bureau of Housing and Urban-rural Development on August 16.
China has been actively guiding local governments to press ahead with the purchases of existing commercial housing stocks and channeling them into affordable housing supply, either for sale or rental, said Dong Jianguo, Vice Minister of Housing and Urban-rural Development, at a press conference on August 23.
Notably, over 10 cities have announced specific plans for purchasing unsold homes, detailing property locations, conditions, and prices, according to China Index Academy, a Beijing-based real estate research institute. "With the implementation work in full swing, it will definitely help digest housing market inventories in China," said a Shanghai-based analyst.
Despite their accelerated policy efforts, local governments across the country still face several challenges in the solid landing of purchases of commercial houses. A key concern is whether the purchase prices, generally lower than market value, will be acceptable to developers.
Another major challenge is funding, Mysteel Global notes. These property purchases will occupy a large portion of capital, which could exacerbate financial pressures on the already debt-ridden local governments. Additionally, managing the operations of these properties after purchase, particularly for affordable housing intended for rental, could strain resources as these projects often have long-term payment collection periods, the analyst warned.
By the end of July, housing inventories in China were still higher by 14.5% on year at 739.26 million sq m, but the rate was narrowed from the 15.2% on-year rise in June, according to data from the National Bureau of Statistics.
Source:Mysteel Global
