China pledges more financial support for ‘sanctioned’ real estate projects

China will expand its “approved list” of real estate projects and speed up bank lending for these unfinished developments to 4 trillion yuan ($561.8 billion) by the end of the year, the national housing ministry said Thursday.

Ni Hong, China’s minister of housing and rural development, made the announcement at a press conference, accompanied by officials from the central bank, the Ministry of Finance and the National Financial Regulatory Administration.

A total of 2.23 trillion yuan had already been approved for loans to approved developers. That number will nearly double to 4 trillion yuan by the end of 2024, according to a senior official from the financial regulator.

Launched in January, China’s “certification” system allows city governments to recommend residential projects to banks for quick loans. The aim was to ensure the completion of unfinished housing projects so that they could be delivered to buyers.

All commercial housing projects are now eligible for project “approval”, Xiao Yuanqi, vice minister of administration said on Thursday. This move is expected to expand the list.

Xiao also stressed that banks should send funds “quickly,” saying they can release loans in full to developers rather than in tranches, according to CNBC’s Chinese translation.

The briefing was the latest in a series of high-profile government policy announcements aimed at strengthening the economy.

In late September, Pan Gongsheng, governor of the People’s Bank of China announced a 50 basis point reduction in the amount of money banks are required to have, known as the reserve requirement ratio or RRR. He also lowered the minimum payment for second home loans nationwide from 25 percent to 15 percent.

Days later, officials at a high-level meeting, chaired by Chinese president Xi Jinping, pledged to “stop the decline in the housing market and promote a stable recovery.”

Disappointing information?

Officials at Thursday’s meeting appeared to be “fine-tuning existing policies,” said Bruce Pang, chief economist and head of Greater China research at JLL. “It will take time for the improvement in sales and prices to translate into property investment and construction.”

Some investors saw the latest upheaval as a sign that Beijing is finally ready to take serious steps to boost growth, and were hoping to find more stimulus at the forum. As Xiao spoke, China’s real estate index CSI 300 fell more than 5%, in a sharp reversal of gains of about 8.7% in the past three trading sessions.

China’s stock market volatility is likely to continue as investors “lack confidence that the stimulus package and what has been announced will turn things around,” said Chi Lo, senior economist at BNP Paribas Asset Management.

Over the weekend, China’s Ministry of Finance officials announced that they will allow local governments to issue more special bonds to buy land and allow affordable housing subsidies to be used to renovate existing buildings, instead of just new construction.

Chinese property shares rose on Monday without the news, with the Hang Seng Mainland Properties Index rising more than 2%. Real estate was also the top performer in Mainland China’s CSI 300, advancing nearly 5%.

Since its peak in 2020, the HSPI has lost more than 80%. In May, Ni told reporters at a press conference that developers “must go bankrupt, run out of money, or be reorganized.”

Housing collapse

More than 50 cities across China have introduced policies to improve the housing market, according to state media, citing the Ministry of Housing.

Ahead of the Golden Week holiday, the city of Guangzhou has announced that it will lift all restrictions on domestic shopping. Meanwhile the governments of Beijing, Shanghai, and Shenzhen moved to ease restrictions on home purchases by non-local buyers and lowered downpayment rates.

The slew of measures came after China’s previous measures led to little significant recovery. New home prices in August fell at the fastest pace in more than nine years, according to data from the National Bureau of Statistics.

The number of new homes sold fell 23.6% for the year to August, slightly better than the 24.3% drop in the year to date from July. Average home prices fell 6.8% in August from the previous month on a seasonal basis, according to Goldman Sachs.

The real estate sector – which once accounted for more than a quarter of China’s economy – has been in dire straits since 2021, when Beijing began cracking down on high levels of debt in the sector, sending dozens of developers into default and leaving many. unfinished housing projects. That has greatly reduced consumer confidence in the market.

— CNBC’s Evelyn Cheng contributed to this story.