China’s pledge to nearly double the loan quota for unfinished residential projects to ¥4 trillion ($562 billion) fell short of market expectations, causing property shares to retreat as investors looked for stronger policies.
The government set the new year-end target for loans to so-called “white-list” property projects after disbursing ¥2.23 trillion as of Oct 16. The measure, aimed at ensuring home completion, was part of a basket of initiatives announced during a Thursday briefing.
The plans underwhelmed, with some analysts calling them “incremental.” A Bloomberg gauge of property stocks in Hong Kong fell more than 8%, with Chinese stocks surrendering earlier gains.
Authorities face a high bar to revive a faltering stock market rally, even as Housing Minister Ni Hong and other officials expressed confidence the government could halt the decline of the real estate sector. China’s residential market is starting to find its bottom, they added. “Policymakers are taking a more pragmatic stance on the property sector,” said Bruce Pang, chief economist for Greater China at Jones Lang LaSalle. They are expecting it “to be neither a driver or a drag of economic growth, but a stabilizer going forward,” he added.
The “white-list” program is part of a top-down plan to ensure unfinished homes are delivered to buyers, and prevent another widespread mortgage boycott. Delivering China’s sold but unbuilt homes, estimated at 48 million units, will require around 3 trillion yuan of direct funding from the central government, according to Nomura Holdings Inc.
China is also weighing whether to allow banks to issue loans to buy idle land and increase affordable housing support for families with two children or more. The government will also renovate 1 million homes in older, rundown dwellings in large cities. The move follows the government’s efforts over the years to renovate shantytowns, albeit at a smaller scale compared with initiatives made between 2016 and 2018.The “market may be disappointed about no concrete number for special bonds for buying unsold units,” said Raymond Cheng, head of China property research at CGS International Securities Hong Kong.Thursday’s announcements followed a slew of earlier policies by the central government to help the world’s No 2 economy meet its growth target of around 5% this year.