China is set to enhance its financial backing for real estate projects included in its “whitelist,” committing to accelerate bank lending for unfinished developments to reach 4 trillion yuan (approximately $561.8 billion) by the year's end, as announced by the country’s housing ministry.
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| China Boosts Financial Support for Real Estate Projects |
Ni Hong, the Minister of Housing and Urban-Rural Development, revealed the plans during a press conference attended by officials from the central bank, finance ministry, and National Financial Regulatory Administration. Currently, 2.23 trillion yuan has been approved in loans for whitelisted developers, and this amount is expected to nearly double by the end of 2024.
Initiated in January, the “whitelist” program allows city governments to propose residential projects to banks for expedited lending. The primary goal is to complete unfinished housing developments, ensuring they can be delivered to buyers.
All commercial housing projects are now eligible for the whitelist initiative, broadening its scope, according to Xiao Yuanqi, vice minister of the regulatory administration. He emphasized that banks should disburse funds promptly, allowing for full loan releases to developers rather than in installments.
This announcement is part of a broader strategy by the Chinese government to stimulate economic growth. In September, Pan Gongsheng, governor of the People's Bank of China, reduced the reserve requirement ratio (RRR) for banks by 50 basis points and lowered the minimum down payment for second-home loans from 25% to 15%.
In a recent high-level meeting led by President Xi Jinping, officials pledged to halt the decline of the real estate market and promote a stable recovery. However, some analysts believe the latest announcements merely refine existing policies. Bruce Pang, chief economist at JLL, noted that it may take time for improvements in sales volumes and prices to positively affect property investment and construction.
Despite hopes for more aggressive stimulus measures, the Chinese CSI 300 real estate index fell over 5% following the briefing, reversing earlier gains. Investor confidence remains shaky as concerns persist regarding the effectiveness of the announced measures to rejuvenate the market.
Over the weekend, the Ministry of Finance allowed local governments to issue more special bonds for land purchases and permitted the use of affordable housing subsidies for existing housing inventory.
Chinese property stocks experienced a rally on Monday following these developments, with the Hang Seng Mainland Properties Index rising over 2%. However, the real estate sector continues to struggle, having lost more than 80% since its peak in 2020 due to a government crackdown on high debt levels, which led to numerous developer defaults and unfinished projects.
In response, more than 50 cities across China have implemented policies to invigorate the real estate market. For example, Guangzhou announced it would remove all restrictions on home purchases, while major cities like Beijing and Shanghai are easing homebuying restrictions for non-local buyers and lowering minimum down payment ratios.
Despite these efforts, the real estate market remains challenged, with new home prices falling at their fastest rate in over nine years as of August. The value of new homes sold dropped by 23.6% year-over-year through August, with average home prices declining by 6.8% from the previous month.
As China navigates this complex landscape, the effectiveness of its policy measures will be crucial in restoring confidence among homebuyers and stimulating growth in the vital real estate sector.
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