China tries drastic measures to boost ailing property sector

China on Friday announced steps hoping to stabilize its crisis-hit property sector, with the central bank releasing an additional 1 trillion yuan ($138 billion, €127.6 million) in funding, as well as loosening mortgage regulation.

As part of the measures, Beijing cut the minimum downpayment for first-time buyers and suggested the government could buy up commercial real estate, as China tries to boost an ailing housing market amid and property developer debt crisis.

'Historic' decision as Evergrande and others struggle

China Real Estate Business, a newspaper managed by the housing ministry, described the policies as "heavyweight," saying they marked "a significant historic moment" for the beleaguered sector.

China's CSI 300 Real Estate index of shares jumped 9.1% on the announcements.

"It's a bold step," Raymond Yeung, chief Greater China economist at ANZ Bank, told Reuters news agency. "The biggest problem is whether the government purchase program will induce private sector demand. Clearing inventory will increase cashflow to developers and help their financial stability, but it does not address private sector confidence."

Investors seeking decisive action from government

Investors hope the new policies, which include local governments buying "some" apartments, will signal the beginning of more decisive government action to compensate for waning property demand, to stymie dropping prices and to alleviate a growing stock of unsold homes.

Property and construction accounts for more than a quarter of China's gross domestic product, but the sector has been under unprecedented pressure since 2020, when authorities tightened developers' access to credit in a bid to cut debt.

Since then, major firms, including China Evergrande and Country Garden, have teetered on the brink, while falling prices have put off consumers from potentially investing in the property sector.

jsi/msh (Reuters, AFP, AP)