China's central bank, the People's Bank of China (PBOC), is taking steps to address a slowdown in the country's housing market, a crucial sector for the world's second-largest economy. A key concern is a large amount of unsold completed housing stock, estimated to be in the millions of units nationwide. The PBOC is also implementing a "whitelist" program launched in January. Under this program, local governments can nominate qualified housing development projects.
The PBOC is also implementing a "whitelist" program launched in January. Under this program, local governments can nominate qualified housing development projects. Banks are then encouraged to provide loans to developers for these.
Additionally, the government has approved a program allowing State Owned Enterprises (SOEs) to purchase unsold completed homes at "reasonable prices." This strategy aims to reduce the overall housing inventory and potentially free up capital for developers
Analysts are cautious about the impact of these measures. The USD 41 billion relending facility, while significant, may not be enough to address the large amount of unsold housing, particularly in higher-priced segments of the market. Additionally, concerns exist about potentially low purchase prices for SOEs by the government. Such low prices may not provide much relief to cash-strapped developers who are struggling with high debt levels.
The PBOC has emphasized the importance of "voluntary participation, demand based ordering, and reasonable pricing" for SOE purchases. This approach aims to ensure the program is sustainable and avoids creating new local government debt. Officials have also stressed that any new purchases should strictly adhere to market principles.
The PBOC's initiatives represent a significant effort to stabilize the housing market. However, it remains to be seen how effective these measures will be in addressing the current challenges. Monitoring market trends, sales figures, and SOE purchase activity will be crucial in the coming months to assess the program's impact. The success of these programs will likely depend on striking a balance between stimulating sales, supporting developers, and maintaining financial stability.
