China Unveils Measures to Revive Property Market Amidst Declining Prices

The People’s Bank of China has announced significant measures to bolster the country’s faltering property market. Scrapping the minimum interest rate and reducing down-payment ratios for first-time and second-home buyers, alongside a 300 billion yuan fund to aid state-owned companies in purchasing homes, are among the key steps outlined.

These measures come as a response to alarming data indicating a sharp decline in house prices, marking the steepest drop in a decade. Vice-premier He Lifeng emphasized the collective responsibility of local governments, developers, and financial institutions in addressing the property sector’s challenges.

This move follows previous attempts to stabilize the market, triggered by the crisis initiated by Evergrande’s default in 2021. Despite efforts to lower mortgage rates, demand for property remains tepid, raising doubts about the effectiveness of rate reductions in stimulating demand.

The property sector, once a significant contributor to China’s economic growth, now faces hurdles with halted construction projects and developer defaults. Analysts estimate substantial central funding of around 7 trillion yuan is required to normalize the inventory of unsold housing.

While larger city property markets may witness a swifter recovery, smaller cities are expected to lag behind. Recent data indicates a drop in both new and existing home sales, highlighting the ongoing challenges faced by the property market amidst sluggish retail sales growth and industrial production exceeding expectations.