Close Menu
Nabka News
  • Home
  • News
  • Business
  • China
  • India
  • Pakistan
  • Political
  • Tech
  • Trend
  • USA
  • Sports

Subscribe to Updates

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

What's Hot

(Hello Africa) South Africa’s Cape Town embraces Chinese culture with vibrant Dragon Boat Festival-Xinhua

May 25, 2025

Zoned out of quiet

May 25, 2025

India’s war on Kashmir’s eyesight

May 25, 2025
Facebook X (Twitter) Instagram
  • Home
  • About NabkaNews
  • Advertise with NabkaNews
  • DMCA Policy
  • Privacy Policy
  • Terms of Use
  • Contact us
Facebook X (Twitter) Instagram Pinterest Vimeo
Nabka News
  • Home
  • News
  • Business
  • China
  • India
  • Pakistan
  • Political
  • Tech
  • Trend
  • USA
  • Sports
Nabka News
Home » Analysis: China’s move to reduce housing inventory brings little joy to developers
China

Analysis: China’s move to reduce housing inventory brings little joy to developers

i2wtcBy i2wtcJune 9, 2024No Comments5 Mins Read
Share Facebook Twitter Pinterest LinkedIn Tumblr Email WhatsApp Copy Link
Follow Us
Google News Flipboard Threads
Share
Facebook Twitter LinkedIn Pinterest Email Copy Link


By Claire Jim and Ziyi Tang

HONG KONG/BEIJING (Reuters) – China is trying to clear a huge stock of unsold homes by converting them into affordable housing, but the programme is likely to be limited in scale and prices low enough that it won’t help cash-strapped property developers, analysts and developers say.

Beijing last month announced plans for a 300 billion yuan ($41 billion) lending scheme as part of a bailout for its crisis-hit real estate sector that could unlock 500 billion yuan worth of bank loans for local state-owned enterprises to buy completed but unsold homes.

Through the central bank-backed scheme, Chinese banks are expected to provide low-interest loans to state-owned enterprises to help them buy homes from developers at “fair prices” and convert them into affordable housing.

But some private developers believe their projects are highly unlikely to be selected because credit lines are insufficient and the program will be launched only in big cities where affordable housing is available. Prices offered by state-owned companies are also likely to be lower, they say.

Developers’ cautious approach could pose a challenge for Beijing, as a series of support measures over the past two years have failed to revive the real estate sector, which accounted for a quarter of GDP at its peak and remains a major drag on the economy.

On May 30, Guangzhou’s Xindang town became the first local government since the support measures were implemented to issue a notice to purchase “appropriate housing stock” for relocation housing.

China Real Estate Business, a media outlet run by the housing bureau, cited the notice as saying local governments would purchase the homes at cost price.

The application was reportedly for a project jointly owned by state-owned Jinmao Group and major developer Vanke Group.

Some developers said buying at cost, or a 20-30 percent discount below market price, turned out better than they expected.

A senior executive at a private developer that defaulted on its loans said his company would be interested in applying if other cities made proposals similar to Xintang’s, but he expected their offers to be low and not enough to cover construction loans.

“If it’s not even enough to cover the development loan, how can we repay it? The lending banks won’t agree,” said an executive at a Shanghai-based developer, speaking on condition of anonymity due to the sensitivity of the issue.

But analysts at Citi and Bank of America say affordable housing is typically sold at a 10-50% discount to private homes, meaning state-owned companies would need to slash prices by 50% to ensure a reasonable profit.

Even if developers could make a profit by selling completed apartments to state-run companies, local governments may demand that the proceeds be used to complete existing projects rather than to repay debt.

“This won’t help us as a listed company or repay our overseas debt,” said an executive at another property developer that has defaulted on its credit.

Gavekal Dragonomics estimates that 500 billion yuan of buying at average market prices could cover 12% of the housing stock, or 20% if bought at discounted prices.

S&P said converting existing stock into social housing would increase transactions at the lower end of the market, lowering prices overall.

China’s housing ministry, the central bank, the country’s top banking regulator and local housing authorities in Guangzhou did not respond to requests for comment. Jinmao did not respond to a request for comment, and Vanke declined to comment.

Execution Risk

“Only a small percentage of distressed developers will benefit,” said Esther Liu, a credit analyst at S&P Global Ratings. “Completing construction is an issue that distressed developers face. They don’t have a lot of completed inventory.”

While developers are waiting for clarity on demand and price offers from state-owned enterprises, some bankers say affordable housing schemes could lead to a decline in asset quality as state-owned enterprises struggle to make enough profit to repay bank loans.

Banks can borrow from the US$300 billion re-lending facility at an interest rate of 1.75 percent to cover 60 percent of the loans they provide to state-owned enterprises.

Overall, analysts estimate that state-owned enterprises will have to pay about 2.5% interest on these loans, in line with China’s average rental yields.

“This is good for the property industry but bad for state-owned enterprises and banks because it essentially shifts some of the risk to them,” said the first executive, who declined to be named as he was not authorized to speak to the media.

It is true that banks and local governments tend to be risk averse.

The People’s Bank of China launched a 100 billion yuan refinancing program in February last year to help local governments in eight cities buy housing stock, but only 2 billion yuan had been used as of the end of March 2024.

“We see execution risk as high given that banks and local state-owned enterprises have to bear the full credit and investment risk,” said Zerlina Zeng, senior credit analyst at CreditSights.

But analysts and property developers say support from the central government is boosting visitor numbers in top cities following the latest stimulus package, which includes lower down payments and the removal of minimum mortgage interest rates.

“The central government is stepping up (support) and we’re at a turning point for important change here,” said Carl Choi, head of Greater China real estate research at Bank of America.

(1 dollar = 7.2455 Chinese yuan)

(Reporting by Claire Jim in Hong Kong and Ziyi Tang in Beijing; Editing by Sumeet Chatterjee and Jacqueline Wong)



Source link

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email WhatsApp Copy Link
i2wtc
  • Website

Related Posts

China

(Hello Africa) South Africa’s Cape Town embraces Chinese culture with vibrant Dragon Boat Festival-Xinhua

May 25, 2025
China

Cultural activities during China Int’l Cultural Industries Fair attract young visitors-Xinhua

May 25, 2025
China

Wang/Sun win third straight mixed doubles title at TT worlds (updated)-Xinhua

May 24, 2025
China

ASEAN-China-GCC cooperation to inject certainty into global economy-Xinhua

May 24, 2025
China

Upgraded China-ASEAN FTA a new driving force for regional prosperity-Xinhua

May 24, 2025
China

China-ASEAN FTA upgrade adds more certainty to global economy-Xinhua

May 24, 2025
Add A Comment
Leave A Reply Cancel Reply

Top Posts

(Hello Africa) South Africa’s Cape Town embraces Chinese culture with vibrant Dragon Boat Festival-Xinhua

May 25, 2025

Swimming at the 2023 World Aquatics Championships Preview

January 5, 2020

21 Best Smart Kitchen Appliances 2024 – Smart Cooking Devices

January 6, 2020

World Music Day 2023: What Is It and Why Do We Celebrate It?

January 7, 2020
Don't Miss

Messi, Inter Miami rally to draw against Philadelphia Union in MLS | Football News

By i2wtcMay 25, 20250

Late goals by Lionel Messi and Telasco Segovia allow Inter to split the points on…

Pacers-Knicks: Siakam, Indiana win Game 2 in East final | Basketball News

May 24, 2025

Thailand readies homecoming for stolen ancient statues located in US museum | Arts and Culture News

May 24, 2025

US lifts first sanctions on Syria following Trump’s surprise announcement | Donald Trump News

May 24, 2025

Subscribe to Updates

Subscribe to our newsletter and never miss our latest news

Subscribe my Newsletter for New Posts & tips Let's stay updated!

About Us
About Us

Welcome to NabkaNews, your go-to source for the latest updates and insights on technology, business, and news from around the world, with a focus on the USA, Pakistan, and India.

At NabkaNews, we understand the importance of staying informed in today’s fast-paced world. Our mission is to provide you with accurate, relevant, and engaging content that keeps you up-to-date with the latest developments in technology, business trends, and news events.

Facebook X (Twitter) Pinterest YouTube WhatsApp
Our Picks

(Hello Africa) South Africa’s Cape Town embraces Chinese culture with vibrant Dragon Boat Festival-Xinhua

May 25, 2025

Zoned out of quiet

May 25, 2025

India’s war on Kashmir’s eyesight

May 25, 2025
Most Popular

Nomura bank employee leaves mainland China after travel ban lifted

July 19, 2024

Palestinian rivals Hamas and Fatah sign “Beijing Declaration of Unity” after meeting with China

July 23, 2024

Oil prices set to fall for third straight week on weak Chinese demand

July 26, 2024
© 2025 nabkanews. Designed by nabkanews.
  • Home
  • About NabkaNews
  • Advertise with NabkaNews
  • DMCA Policy
  • Privacy Policy
  • Terms of Use
  • Contact us

Type above and press Enter to search. Press Esc to cancel.