China has announced an expansion of its support for the struggling real estate sector, increasing the loan quota for unfinished housing projects to 4 trillion yuan ($561.8 billion) by the end of 2024. The initiative, part of a broader effort to stabilize the sector, was detailed at a press conference on Thursday by Ni Hong, China’s Minister of Housing and Urban-Rural Development, alongside senior officials from the central bank, finance ministry, and National Financial Regulatory Administration.
The “whitelist” program, launched in January, allows local governments to recommend residential projects for fast-track lending, aiming to complete unfinished developments and restore buyer confidence. So far, 2.23 trillion yuan in loans have been approved for whitelisted developers, with plans to nearly double that amount by year-end. Xiao Yuanqi, vice minister of the financial regulatory administration, emphasized the expanded eligibility of all commercial housing projects for the whitelist, signaling a significant broadening of the program.
In a notable shift, Xiao urged banks to release loans in full to developers rather than in stages, accelerating the flow of funds to speed up project completions. This aligns with Beijing’s broader strategy of using targeted financial measures to revive the property market, a key pillar of the Chinese economy.
Despite these efforts, market reaction was tepid. The CSI 300 Real Estate Index fell over 5% during the announcement, reversing recent gains of 8.7% over the previous three sessions. Investors were hoping for more aggressive measures beyond policy adjustments, reflecting ongoing concerns about the sector’s outlook.
Bruce Pang, chief economist at JLL, described the measures as “fine-tuning existing policies” and cautioned that it would take time for improvements in sales volumes and property prices to translate into increased investment and construction activity. Chi Lo, senior economist at BNP Paribas Asset Management, echoed this sentiment, noting that market volatility is likely to persist as investors remain unconvinced about the effectiveness of the stimulus.
China’s real estate market, once a growth engine accounting for over a quarter of the country’s GDP, has been mired in a protracted downturn since 2021. The decline was triggered by Beijing’s crackdown on excessive leverage within the sector, leading to defaults by major developers and a wave of unfinished projects that undermined buyer confidence. More than 50 cities across China have since implemented policies aimed at reviving the market, with limited success.
Ahead of the Golden Week holiday, several major cities, including Guangzhou, Beijing, Shanghai, and Shenzhen, eased home-buying restrictions to stimulate demand. Guangzhou notably removed all purchase restrictions, while other cities relaxed rules for non-local buyers and lowered minimum down payment requirements. However, new home prices in August fell at their fastest rate in over nine years, and the value of new homes sold plummeted by 23.6% year-on-year, according to the National Bureau of Statistics.
To further stimulate the market, officials announced new fiscal measures over the weekend. The Ministry of Finance will permit local governments to issue additional special bonds for land purchases and allow affordable housing subsidies to be applied to existing inventory, not just new construction. This news initially lifted Chinese property stocks, with the Hang Seng Mainland Properties Index rising over 2% and the CSI 300’s real estate sector gaining nearly 5%.
Despite these moves, the Hang Seng Mainland Properties Index has lost over 80% of its value since its 2020 peak. In May, Ni Hong acknowledged the severe challenges facing the sector, stating that developers needing bankruptcy or restructuring should be allowed to proceed, reflecting Beijing’s pragmatic approach to resolving the crisis.
As China continues its efforts to stabilize the sector, investors remain cautious. While Beijing has introduced a range of measures, the effectiveness of these initiatives in halting the slide in the property market and restoring investor confidence is yet to be seen.
