China says it will start buying apartments as housing slump worsens
HONG KONG — In a housing crisis that shows no end, the Chinese government is stepping in as a buyer of last resort.
Chinese officials Friday took their boldest step yet, unveiling a nationwide plan to buy up some of the vast housing stock languishing on the market. They also loosened rules for mortgages. The central bank said it would provide $41.5 billion in cheap loans to help state-owned enterprises buy housing built but not sold.
The flurry of activity occurred just hours after new economic data revealed a hard truth: No one wants to buy houses right now.
Policymakers have tried dozens of measures to entice homebuyers and reverse a steep decline in the property market, which has shown few signs of recovering soon.
On Friday, authorities from across China dialed in to a video conference to discuss the challenges they faced. China’s vice premier, He Lifeng, announced a major shift in the government’s approach to dealing with the property crunch, which has prompted households to cut spending. He said that local governments could begin to buy homes to start dealing with the huge numbers of empty apartments.
The government-purchased homes would then be used to provide affordable housing. He did not provide any details on when such a program would begin or how it would be funded.
The approach is similar to the Troubled Asset Relief Program, or TARP, which the U.S. government established in 2008 to buy troubled assets after the collapse of the American housing market, said Larry Hu, chief China economist for Macquarie Group, an Australian financial firm.
“It’s a shift in policy in the sense that now local governments are getting into the market to buy property directly,” Hu said.
Some local governments have been quietly testing out the approach in cities such as Jinan, Tianjin and Qingdao along China’s coast, and Chengdu in the south, but this is the first time a senior Chinese official has said anything about it on a national stage.
Addressing officials Friday, He said they had to “fight the tough battle” of dealing with all the unfinished property around the country, according to an official account from Chinese state media outlet Xinhua.
The government’s official data shows that Beijing has a long way to go to increase confidence in the real estate market. The amount of unsold homes is at a record high, and property prices are declining at a record pace.
