China Launches Property Rescue Package to Stabilize Ailing Housing Sector

China introduced a comprehensive property rescue package late last week in an effort to support its struggling property market. 

The measures include reduced down payment ratios, the removal of the mortgage rate floor, and a 300 billion yuan (US$4.1 billion) re-lending facility by the People’s Bank of China (PBOC) to enable state-owned enterprises (SOE) to purchase unsold homes. 

Despite being the most aggressive measure by authorities to date, analysts remain cautious about whether the rescue package would be enough. For starters, the inventory of unsold property is massive: estimated to be at 28 trillion yuan (US$3.9 trillion) by Barclays and at 30 trillion yuan (US$4.1 trillion) by Goldman Sachs.

Via the Financial Times

“The new property measures are unlikely to deal with the full overhang of unsold homes given the PBOC’s new facility’s initial size,” Mansoor Mohi-uddin, chief economist of the Bank of Singapore said in a note. “But the aid is likely to be scaled up if it proves successful.”

This is compounded by weak sentiment among buyers, as private banks noted in this report from Finews Asia

“The issue in first-tier cities is weak sentiment, not overcapacity […] especially in good school districts and upper-middle-class areas,” UBP senior economist Carlos Casanova wrote in a recent note. 

Moreover, the rescue package may also introduce new risks into the system, even if it achieves its intended objectives. Casanova points out that while the policy addresses the problem of problematic inventories in third-tier cities, it could lead to capital misallocation and weakening fundamentals for SOEs and state banks.


Information for this story was found via the Financial Times, CNN, Finews Asia, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Fortune Bay: The Potential Billion Dollar Project

Japan Gold Enters New Chapter as Barrick Alliance Concludes – John Proust

Barrick Mining’s “Company Defining [Gold] Discovery”

Recommended

ESGold Secures $9 Million In Non-Dilutive Funding From Ocean Partners

Altamira Gold Encounters Porphyritic Intrusive Rocks In Initial Scout Drilling At Regional Targets

Related News

Ray Dalio: Digital Yuan Will be More Competitive Than Digital Dollar as US Debt Levels Surge

According to Ray Dalio, China’s growing dominance in the global economy will put the yuan...

Tuesday, June 1, 2021, 03:22:00 PM

Kyle Bass: Chinese Government will use Evergrande Collapse to Reign in Surging Housing Prices

Fresh from calling out BlackRock and Ray Dalio over their optimistic investing prospects in China,...

Wednesday, September 22, 2021, 11:28:00 AM

Didi Shares Plummet Amid Reports of China Preparing Severe Penalties

Shares of Didi were sent spiralling downwards on Thursday, after reports emerged that Beijing is...

Thursday, July 22, 2021, 12:12:12 PM

People’s Bank of China Adds 15 Tonnes Of Gold To Reserves

China’s central bank bought even more gold last month, as it looks to strengthen the...

Wednesday, February 8, 2023, 03:00:00 PM

Chinese Communist Elites Expected to Select President Xi Jinping for Third Term

China’s top Communist Party officials are expected to select current president Xi Jinping for a...

Monday, October 17, 2022, 12:17:57 PM