The Chinese government has pledged to support state-owned entities, allowing them to purchase unsold apartments.
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Chinese authorities last week announced a series of measures aimed at supporting the country’s struggling real estate sector.
One of these measures is to support state entities by allowing them to purchase unsold apartments, a move that could provide developers with the funds they need to complete construction on sold properties, according to a report. CNBC.
Tao Ling, deputy governor of the People’s Bank of China, told reporters on Friday that the central bank will provide financial institutions with 300 billion yuan ($42.5 billion) in loans to state-owned enterprises to purchase completed and unsold apartments.
The real estate company can then use the profits from these sales to complete construction of the apartments that are yet to be completed.
In recent years, a large number of pre-sold, unfinished houses have flooded into the Chinese real estate market as developers encountered financing problems. The number of unfinished homes for sale is estimated at 20 million.
According to Caixin, at the current sales pace, it may take more than two years to clear the existing inventory of new finished homes.
Experts agree that China’s real estate problems may take quite some time to resolve. One obstacle to the new measures is that local governments still have limited resources, limiting how much they can buy.
Chinese home buyers also face huge barriers to entry, with housing prices preventing many from becoming home buyers.
“Unless potential home buyers feel serious changes in housing price increases, current housing prices are still too expensive for household income or rental yields,” said Zhu Ning, a finance professor at Tsinghua University. CNBC. “However, I’m not sure the government is willing to let house prices rise significantly again.”
On Friday, the People’s Bank of China took steps to address the problem, removing the floor on mortgage rates and lowering minimum down payment ratios for first- and second-time homebuyers.
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