China’s Commitment to Property Market Stabilization
In response to a recent report criticizing the slow progress in stabilizing China’s property market, housing officials have renewed their focus on fully finished homes. This approach aims to protect homebuyers and rebuild confidence in a struggling sector.
At a State Council press conference on Friday, Deputy Housing Minister Dong Jianguo announced that they will expand the sale of fully finished homes “vigorously and orderly” across more regions, as part of the China property market stabilization efforts. In some cases, the government will require the sale of these completed homes when auctioning land. Dong also noted that many areas have already started trial projects for selling finished homes. These projects go hand in hand with efforts to secure funding for developers to complete stalled projects. The shift away from selling homes before construction begins marks a significant change, which helps avoid delays and defaults that were common in the past.
Challenges and Measures in the Property Market
Emphasizing completed homes is crucial for restoring homebuyer confidence and reviving the market. However, this approach increases pressure on developers’ cash flow since they can no longer depend on pre-sales to finance construction. The property sector, once a key driver of China’s economy, now drags on the country’s recovery. Real estate investment fell by 10.2% year-on-year in the first seven months of 2024, and home sales dropped by 25.9% through July. This decline has strained local government finances and affected social stability.
To tackle these issues, Beijing has introduced several easing measures, including calls for lower mortgage rates and reduced down payments. The central government allows regions to implement local policies, showing their commitment to stabilizing China’s property sector.
Looking Ahead: Strengthening Developer Support
Dong revealed that the Ministry of Housing and Urban-Rural Development, along with financial regulators, has identified nearly 4 million unfinished homes nationwide as part of the China property market stabilization efforts. Furthermore, they plan to deliver these homes by the end of the year. To achieve this, a financing-coordination mechanism injects funds into developers, ensuring project completion on time. Additionally, Dong emphasized that developers must qualify for a “white list” to receive loans. He stressed the importance of winning this battle to guarantee home deliveries.
In Zhengzhou, Henan province, a trial focuses on funding white-listed developers and projects. Homebuyers receive priority for compensation if a developer fails, showing the broader effort to restore stability and confidence in China’s housing market.
In summary, China’s focus on property market stabilization through promoting fully finished homes and supporting developers is essential. These initiatives aim to restore confidence and ensure long-term market stability.