China is taking bold steps to revive its struggling property market, with local governments announced plans to purchase unsold homes and convert them into affordable housing. The move comes as the Chinese real estate sector continues to grapple with a prolonged slump that has led to widespread concerns about the impact on the economy and household spending.
According to reports, officials in Hangzhou, a major city in China, announced on Thursday that they would directly purchase unsold residential homes from the market. The move is seen as a trial run for a larger-scale intervention across the country to address millions of unsold homes and ease the housing crisis.
The news sent Chinese stocks soaring, with Sunshine 100 China Holdings, a Beijing-based developer, surging 127% on Thursday. The rally came after analysts from Citi and ING Group suggested that such a move could be a major solution to the property crisis.
China's vice premier, He Lifeng, also indicated support for the plan during a meeting with policymakers on Friday. Mr. He suggested that local governments could begin buying homes to address the issue of vast housing stock and provide affordable housing for residents.
The move is reminiscent of the Troubled Asset Relief Program (TARP) implemented by the United States government in 2008 to buy troubled assets after the collapse of the American housing market. However, details on when such a program would begin and how it would be funded have yet to be announced.
The Chinese property market has been in decline for several years, with many cities reporting falling home prices and slowing sales. The crisis has led to widespread protests by homebuyers who are unable to sell their properties or complete purchases due to the uncertainty surrounding the market.
In an effort to boost demand, Chinese policymakers have implemented various measures over the past few months, including relaxing purchase restrictions in major cities and offering tax incentives for first-time homebuyers. However, these efforts have yet to yield significant results.
The housing crisis has also raised concerns about the broader impact on China's economy and household spending. With many households unable to sell their properties or complete purchases, they are forced to delay other major expenditures such as car purchases and travel plans.
Despite the challenges, some analysts remain optimistic about the prospects for a recovery in the Chinese property market. They argue that with strong economic fundamentals and a large population of first-time homebuyers, there is significant potential for growth once confidence in the market returns.
However, others caution that any recovery may be slow and uncertain, given the complexities of China's housing market and the ongoing challenges posed by government regulations and economic uncertainty.
