China Eyes Mass Purchase of Unsold Homes to Counter Economic Downturn

China is reportedly considering purchasing unsold housing inventory to give a push to its struggling real estate market
China Economy
China Economy

As China's economy continues to struggle, a major reason behind the crisis is probably the cold real estate market of the country. This has prompted China to contemplate a plan for local governments nationwide to purchase millions of unsold homes, in order to revive the struggling real estate market.

According to a report by Bloomberg, the State Council is gathering inputs from various provinces and governmental bodies for this plan. Though China has previously tested several pilot initiatives to reduce surplus housing stock through state financing, this new plan would be considerably larger in scale.

State-owned enterprises at the local level are expected to assist in acquiring unsold properties from struggling developers at discounts by using loans from state banks, as per sources cited in the report. A large portion of these properties would eventually undergo a transition into affordable housing options.

While officials are still discussing the plan's details and feasibility, if the Dragon nation's leaders approve, it could take months to finalize the plan. However, if the plan comes into play, it would be a significant step to address the economic challenges faced by China. Home sales have dropped by nearly half (47 per cent) in the first four months of the year, and unsold housing inventory is at an eight-year high, risking millions of jobs.

Despite previous attempts by Beijing to purchase unsold apartments, most smaller-scale initiatives have been unsuccessful. In early 2023, the People's Bank of China allocated 100 billion yuan ($13.8 billion) to certain financial institutions through a specialized lending facility. This funding was aimed at helping eight cities in purchasing unsold properties for local subsidized rental programs on a trial basis.

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