China aims to solve property puzzle with affordable housing push, but debt cloud remains
- Local authorities in China have been encouraged to buy unsold homes to create affordable housing amid efforts to address a property crisis
China’s housing authority has become the latest to join a government plan for hundreds of cities to buy unsold commercial homes and convert the units into affordable housing amid a stubborn property crisis, but analysts said some indebted urban areas may have trouble raising the money.
The Ministry of Housing and Urban-Rural Development said on Thursday that local authorities should push cities at or above the county level to acquire existing commercial homes, according to state broadcaster CCTV.
Local governments should encourage the purchases “vigorously” and in an “orderly and effective” way, the ministry said.
“The ministry said cities and counties should consider actual demand for affordable housing, the inventory level of the commercial housing market and other factors based on the local real estate market situation,” CCTV said.
James Macdonald, the Shanghai-based head of China research with property services firm Savills, said China could increase the supply of rental properties in poorer areas, while making some headway in destocking unused properties.
These conversions and acquisitions will likely only represent a small portion of the overall market
“There’s been a spate of different policies [to destock],” Macdonald said. “The policies sound good in principle, but it just depends on where the government is going to get the money.”
China’s efforts to accelerate the clearance of excess inventory and shore up the property market, which had made up a quarter of China’s economic growth at its peak, has gathered pace, but weak sentiment has persisted.
Unsold housing inventory totalled 742.56 million square metres (7.99 billion sq ft) in May, according to the National Bureau of Statistics.
And the push to convert commercial properties into affordable housing forms “part of the puzzle rather than an ultimate solution” to the property market, ING Greater China economist Lynn Song said.
“The measures will help digest some of the most difficult to sell properties, and at the same time will also help with developers’ liquidity,” Song said.
“With that said, these conversions and acquisitions will likely only represent a small portion of the overall market.”
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Home buying restrictions have also been relaxed, with authorities in the southern city of Zhuhai this week stopping the vetting of homebuyers’ qualifications and cancelling limits on the number of commercial property sales allowed over fixed time periods in a joint cooperation zone between Macau and Guangdong province measuring 106 square kilometre (41 square mile).
The central bank and the National Administration of Financial Regulation also said in January that they would boost the supply of rental properties in large cities where home prices often exceed the resources of young workers.
China Real Estate Information Corporation said that just four out of 30 major cities showed improvement in destocking trends last month compared to April, with 20 of the cities expected to take more than 18 months to reduce their stockpiles.
