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China adopts new measures to resolve its housing crisis and stimulate growth
China announced new measures to reinvigorate its struggling property industry, after the latest data showed that house prices fell in April.
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ELAINE KURTENBACH AP Business Writer
May 17, 2024, 1:41 am ET
• 4 minutes of reading
China on Friday announced a series of new measures to reinvigorate its struggling property industry, after the latest data showed that housing prices have fallen by almost 10% since the start of the year.
Among other things, the central bank said it would reduce the minimum initial payment for mortgages and eliminate interest rate floors for first and second homes.
China’s property market slumped after a crackdown on excessive debt by property developers several years ago, dragging with it a wide range of other businesses – such as home furnishings, appliances and construction – and slowing growth in the world’s second-largest economy.
Dozens of developers, whose legions of high-rise apartments have transformed urban landscapes around the world. China, did not pay their debts. Many projects simply stopped, unfinished.
He Lifeng, deputy prime minister, said authorities would implement policies suited to each city and “fight the tough battle of dealing with the risk of unfinished commercial housing.”
“We will move forward solidly on important tasks such as the guaranteed delivery of housing and the absorption of existing commercial housing,” He said, according to the official Xinhua news agency, in a high-level conference call on real estate policies.
The drive to attract more families to buy homes has gained momentum after previous measures such as interest rate cuts and government-backed financing failed to attract buyers to the market as developers struggle to deliver promised homes. and paid.
Housing is a pillar of investment for the Chinese, given the low level of interest rates paid by banks, and many potential buyers may be waiting for the market to bottom out before considering further purchases. Additionally, layoffs and other disruptions caused by the pandemic have left many people wary of spending.
The People’s Bank of China’s announcement said that from Saturday, the interest rate for initial loans from housing provident funds for under-5s will be reduced by 0.25 percentage points to 2.35%. The rate for loans longer than 5 years was reduced by 0.25 percentage points to 2.85%.
The minimum down payment for loans for a first home will be 15% of the purchase price. For second homes, it will be 25%, he said.
Earlier Friday, officials at the National Bureau of Statistics acknowledged that domestic demand – consumer and business spending – remained “insufficient” and said the government was considering other ways to revitalize the property industry after house prices had fallen. down 9.8% in January-April from a year earlier.
“The complexity, gravity and uncertainty of the current external situation environment are increasing significantly. There is insufficient effective domestic demand, high business pressure and many hidden risks and dangers,” said Liu Aihua, a spokesperson for the agency.
“The foundation for recovery needs to be strengthened,” Liu said.
The State Council, China’s Cabinet, was due to hold a press conference on Friday focusing on the real estate sector.
One of the main strategies being implemented involves local governments purchasing apartments that have not been sold due to weak demand, to be rented as affordable housing in experimental programs that appear to have become national policy.
Financial media outlet Caixin reported that the Ministry of Housing, the central bank, other government agencies and state banks were creating a joint working group to brainstorm ways to revitalize the industry.
China’s economy grew at a robust rate of 5.3% in the first quarter of this year, but that is relatively slow for a developing economy, and signs of weakness have persisted.
The report published on Friday by the National Bureau of Statistics showed that industrial production increased by 6.7% in April from the previous year and investment in fixed assets such as factory equipment increased by 4.2%.
But housing starts fell nearly 25% from the previous year and sales measured by floor area fell 20%. Financing for real estate projects fell 25%.
Retail sales increased just 2.3% in April.
Officials said they expect demand to recover as the government implements policies aimed at getting families to sell old cars and appliances and buy new ones.
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Associated Press researchers Yu Bing and Wanqing Chen in Beijing contributed to this report.