China Launches Sweeping Measures to Tame a Property Crisis That Deepens

China unveiled major steps to tackle its property crisis, including lowering home deposit requirements, a $41.5B fund for affordable housing, and letting local governments buy unsold units.

China has revealed its most significant steps so far in trying to overcome the serious house price decline in its property sector, while new data showed home prices falling at the most rapid pace since 2012.

The Chinese government on Friday approved a set of plans, including lowering the minimum down payment requirement on homes for buyers and encouraging local governments to buy houses from developers.

The People's Bank of China announced that it is going to create a 300 billion yuan ($41. 5 billion) loan facility to support the purchase of affordable housing. The money will be lent to the state enterprises that purchase the unsold residential units, according to Deputy Governor Tao Ling.

Vice Premier He Lifeng in a separate development told officials that local authorities may buy properties at "reasonable prices" and sell them as affordable housing marketed by the media, without giving details on the extent of such a plan.

The central bank also decreased the minimum initial payment for first-home buyers to 15% from 20% and to 25% from 30% for the second houses. That is, it abandoned the setting of minimum mortgage lending rates.

The broad response comes as the official figures showed that house prices decreased by 0. The 6% month-on-month decrease in April was the biggest since November 2014. For the last 10 months, prices have been falling.

China's property troubles worsened when the government placed lending restrictions on indebted developers in the second half of 2021 as part of efforts to prevent excessive debt. As a result, a few large builders have defaulted, with China Evergrande which is the most indebted developer in the world, ordered to be liquidated in January.

The real estate sector used to be the main economic growth driver before the recent downtrend. This has not only burdened the world’s second-largest economy but has raised all kinds of worries about financial stability all over the world.

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Besides, a Hong Kong judge on Friday adjourned the hearing that could result in a liquidation of the other big developer, Country Garden, to June 11.