China asks for property restrictions to be rolled back in bid to reverse economic decline

For most of the past year, China’s economy has been reeling under Xi Jinping’s dual campaigns to rein in soaring real estate prices and stamp out any traces of Covid-19 within the country’s borders.

Now, as is Moves to ease epidemic restrictionsChina’s leader, Mr. Xi, is pointing to a reversal of the real estate crackdown, too, a tacit acknowledgment of the economic pain and public frustration the two policies have caused.

China’s central bank and the largest bank regulator have issued a wide-ranging series of measures aimed at strengthening Supply and demand for housingAccording to a notification distributed Friday to the country’s financial institutions and officials involved in policy making. People close to the central bank confirmed the authenticity of the document.

The new policies, which were signed off by Mr. Shi, according to officials involved in making the policy, remove some of the earlier restrictions aimed at reducing debt for property developers and giving lenders permission to extend loans to homebuilders with financial problems.

“These real estate actions, on top of announcements of Covid mitigation, are a clear indication of Beijing’s intensifying efforts to support growth,” said Michael Hirson, head of China research at 22V Research, a New York-based firm focused on investment strategy.

While local governments across China have taken more modest measures to ease some of the pressures facing real estate companies, the new package of 16 measures represents the biggest step yet to rescue a sector that for decades has been a mainstay of growth for real estate companies. The second largest economy in the world.

Real estate actions have led to a decline in home sales, hurting overall growth in the real estate sector.


picture:

Cfoto / Zuma Press

For decades, Chinese home prices have outpaced the broader economic growth rate.


picture:

Anthony Kwan/Bloomberg News

Dan Wang, chief economist at

Hang Seng

The Bank of China, which drew a contrast with previous rounds of additional support measures.

Ms Wang said that while developers face impending loan repayment deadlines, regulators are keen to avoid any systemic risks in the financial sector stemming from a wave of potential defaults. However, she added, “Home purchase demand remains subdued,” and any reversal in housing market sentiment is likely to depend on the long-term outlook for the economy.

The easing of restrictions on real estate and Covid comes just weeks after Mr Xi secured another five years in power at a closely watched Communist Party congress. Having consolidated his political control, Mr. Xi now faces the prospect of a third term facing the country’s worst prolonged economic slowdown in decades.

Much of the economic weakness is a direct product of his crackdown on COVID-19 style, and, starting last year, he tamed The real estate market has been booming for four decades Which officials have warned could be a bubble.

Real estate actions have led to an increase in defaults by real estate developers, an increase in bad debts to banks, and a decline in home sales and investment – all of which have weighed heavily on overall growth in recent quarters.

China GDP expanded only 3.0% In the first nine months of 2022, it is well below the government’s official full-year target of around 5.5%, set in March.

China Evergrande Group, which has long been the country’s largest developer, is its largest debtor.


picture:

Ali Song/Reuters

Chinese home prices for decades have outpaced the broader economic growth rate, leading to increased credit in real estate speculation and more. Raising property values. The authorities in recent years have repeatedly tried to break the vicious circle with various tightening measures, only to loosen them whenever growth appears threatened.

By 2019, China’s home and developer inventory totaled $52 trillion, according to

Goldman Sachs Group a company ,

Twice the size of the US housing market.

When Beijing tightened the screws on developers last year – and then reasserted its commitment to stricter rules – many private developers began teetering on the brink of crisis. Among the most prominent

Chinese Evergrande GroupAnd the

It has long been the country’s largest developer and now its largest debtor, although concerns have spread to other large private players.

More than 30 developers have defaulted on their dollar bonds. International investors dumped their bonds, pushing price levels to new lows and leaving even the most powerful private developers struggling to sell new debt.

Shares of Chinese real estate developers jumped on Monday on the news.

Country Garden Collectibles a company

One of the country’s largest real estate firms by contract sales, it jumped 40% in early trading in Hong Kong, taking its gain this month to more than 200%. The Hang Seng sub-index of real estate stocks rose 7%.

Dollar bond rates for developers who haven’t defaulted on their debt – including

Agile Holding Group Ltd.

And the

Longfor Group Holdings Ltd.

It also rose sharply from very sad levels, as investors bet on their possible recovery.

As broader economic pain mounts this year, regulators and regional governments have moved modestly To try to avoid a full-blown housing crisis, introducing limited measures such as tax rebates, cash bonuses, and lower down payments, as well as providing banks with effective guidelines to increase mortgage lending. But those partial moves have so far failed to reverse sentiment and lift the sector.

In October, sales at the nation’s 100 largest real estate developers fell to $76.7 billion, down 28.4% from a year earlier, and the 16th consecutive month of year-over-year declines, according to China Real Estate Information Corp. , which is an industry. data provider.

As foreign investors and homebuyers lose confidence in China’s real estate market, developers are offering cars and pigs to boost sales. The Wall Street Journal examines ads and policies to find out how the country’s real estate turmoil could spill over into the global economy. Photomontage: Sharon Shea

Now, with a new leadership team in place after the party convention – one filled with party members loyal to Mr. Xi – the commander in chief is moving toward a more concerted approach to supporting the economy, as part of a broader effort to prepare for greater competition with the United States.

“It appears that the scope for political facilitation has broadened the post-party congress,” said Larry Ho, a Hong Kong-based economist at Macquarie. “With the impact of previous efforts waning, policy makers are now giving a big push to get credit to flow into the real estate sector.”

Credit was a particular concern for developers, with many relying on heavy borrowing to build new projects and stay afloat. In the first nine months of this year, money raised by real estate developers in China fell 24.5%, according to data from the National Bureau of Statistics.

The new notice, which was jointly issued by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, is not a complete reflection of Mr. Xi’s previous efforts to curb glut in the sector.

“Policy makers are now making a big push to get credit to flow into the real estate sector.”


– Larry Ho, Macquarie Economist based in Hong Kong

The notice, billed as a package aimed at ensuring the “stable and healthy development” of the sector, still emphasized the need to curb speculative property purchases, repeating Mr. Shi’s motto that “housing is to live in, not to speculate on.”

Under the new measures, bank loans owed to developers and some types of non-bank credit due over the next six months can be extended for a year. Developer bond payments can also be extended.

In addition, banks are encouraged to provide financing for unfinished housing projects and to negotiate with homebuyers about Mortgage repayment extensionan apparent attempt to help defuse the growing discontent among those who have boycotted mortgage payments since the summer.

Banks are also encouraged to provide financing to support the acquisitions of real estate projects by developers who are more financially sound than weaker ones.

The new policies require financial institutions to treat state-owned and private developers equally, a measure that appears aimed at addressing banks’ reluctance to lend to private developers, according to Lian Yuejin, research director at Shanghai-based E-House China R&D Institute. Research company.

“Regulators are making all-out efforts to target a smooth landing for the real estate sector,” said Bruce Pang, chief China economist at Jones Lang LaSalle. However, with the measures skewed too far toward improving liquidity for cash-strapped developers, he said, “these measures will likely not be enough to avoid a slowdown in the actual market.”

Rebecca Feng contributed to this article.

Write to Lingling Wei at [email protected], Cao Li at [email protected], and Stella Yifan Xie at [email protected]

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