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China property: Beijing’s stimulus plan needs more time, money and policy support to resolve long-standing housing crisis
- China has US$3.9 trillion worth of unsold properties, which makes Beijing’s funding plan account for less than 2 per cent of that excess inventory
- There is also a big question mark on how local governments, saddled with US$5.7 trillion in debt, would be able to absorb the unsold properties
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After Beijing introduced its most ambitious effort to date to revive the property sector and bolster the country’s economic recovery, analysts and economists find the plan’s scale too small and remain uncertain about its effectiveness.
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Market experts suggested that initiatives to solve the long-standing property crisis will need more meat on the bone, as policymakers approach this issue with a heightened sense of urgency.
Still, Chinese property stocks received a boost from some positive sentiment after Beijing announced a slew of policy measures, including easing mortgage rules and encouraging local governments and state-owned enterprises (SOEs) to buy unsold housing inventory.
On Friday, Longfor Group Holdings surged 11 per cent to HK$15.30 and China Overseas Land and Investment jumped 4.4 per cent to HK$16.52. China’s CSI 300 Real Estate index of shares jumped 9.1 per cent, while the Hang Seng Mainland Properties Index, a gauge tracking 10 home builders listed in Hong Kong, advanced 5.3 per cent.
“We view the scrapping of the mortgage rate floor and eased mortgage rates for housing provident fund loans as positive for lifting buyers’ sentiment,” Morningstar equity analyst Jeff Zhang said. “We think it may take a longer cycle for the policy tailwind to translate to home-purchasing activities, with the effects remaining to be verified.”
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