Xi Jinping’s government announced its most forceful attempt yet to rescue the beleaguered Chinese property market, relaxing mortgage rules and urging local governments to buy unsold homes as authorities become increasingly concerned about the sector’s drag on economic growth.
The support package also includes lower down-payment requirements for homebuyers and 300 billion ($42 billion) of central bank funding to help government-backed firms buy excess inventory from developers. Those properties would then be converted into affordable housing.
While equity investors cheered the news — sending an index of developer shares up nearly 10% on Friday — it’s far from clear whether the plan will draw a line under the property crisis. The funding announced by China’s central bank is just a fraction of what some analysts say is needed to address the supply-demand mismatch in housing, and many potential buyers are waiting for prices to fall further before stepping in.
“This is a little bit similar to the bailing out of financial institutions going through the Great Financial Crisis,” Zhu Ning, a professor of finance with Shanghai Advanced Institute of Finance, said during an interview with Bloomberg TV. “But in the end unless the central government is stepping in and extends its own credit to the real estate market, it’s a little difficult or too premature for us to believe we’re out of the woods.”
@ISIDEWITH3wks3W
Do you think providing a large amount of funding to help with a housing crisis is a good investment for a country, or could the money be better spent elsewhere?
@9MKFWMS3wks3W
No, as this can result in large repercussions in the property market in the longer term.
@ISIDEWITH3wks3W
What are the potential downsides of making it easier for people to get mortgages on homes?
@9MKFWMS3wks3W
By relaxing repayment criteria you are increasing the potential risk of repayments not being met due mortgages potentially being given to those who can't afford them. Governments need to be careful when also interfering with businesses in this way
@ISIDEWITH3wks3W