The Chinese government is rushing to support its struggling real estate sector with new policies

On Wednesday o People’s Bank of China According to an official statement, a meeting was held in the north-eastern province of Shandong, the main topic of which was to accelerate progress in refinancing apartments for low-income people.

“(The action) is a response to the state policy of using up available housing units, optimizing the efficiency of the housing market and pushing for a new development model for real estate sector” – said the statement.

Jinan in Shandong Province, Tianjin, Chongqing and Zhengzhou City in Henan Province shared their experiences after participating in the pilot programs at the meeting.

Then on Thursday, the Ministry of Natural Resources issued an official notice on the rehabilitation of old communities, citing the experiences of Beijing, Shanghai, Guangzhou and Nanjing.

“This action aims to deepen research and assessment, strengthen coordination and policy support, and streamline the approval process to continually improve land-use planning guidelines,” the department said in a statement.

A report on China’s economic outlook published on Thursday by Spanish bank BBVA said that “weak market sentiment among households and businesses remains” and “the housing market remains the top risk priority.”

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“It is not easy to reverse the deflationary environment in the face of a deep real estate market correction,” Dong Jinyue, chief economist at BBVA Research, said in the report. “China’s real estate market remains a major risk to the economy in 2024.”

China posted better-than-expected economic growth of 5.3 percent in the first quarter, staying on track to meet this year’s growth target despite constant challenges from the deterioration in the real estate market and pent-up domestic demand.

China’s real estate sector has become a major pillar of its economy in recent decades, generating 25-30 percent of the country’s GDP, according to a report published in May by French insurance company AXA.

“However, recently… developers have been slow to produce finished homes… In 2022, developers defaulted on bonds worth more than 50 billion yuan ($6.89 billion),” said Wang Yingrui, a macroeconomic research economist at AXA. “Given the significant impact the real estate sector has on the economy, this was a drag on broader activity.”

Early last month, the Chinese government announced a new package of policies aimed at recovery real estate marketincluding lowering the down payment rate for the purchase of a first home to 15%. and purchase of a second home up to 25 percent.

Other measures include shifting the mortgage interest rate floor for homebuyers, setting a mortgage pool of 300 billion yuan, and allowing local governments and state-owned enterprises to buy unsold land and apartments from distressed developers.