China property: government buying of unsold homes lifts sentiment but is no cure-all for market doldrums, analysts say

Sentiment in China’s property market rose on expectations that the government will step in to soak up unsold inventory, after plans for Hangzhou to do so came to light.

However, analysts and economists remain cautious about the scope of such aid – and whether it is the best way to rescue the market.

Shares of CIFI Holdings jumped 29 per cent to HK$0.49 on Thursday, the biggest increase in almost six months, while peer China Vanke rose 16 per cent to HK$5.73, extending its gain to 24 per cent this month.

Authorities in Hangzhou, the capital of China’s Zhejiang province and home to Alibaba Group Holding and carmaker Geely, said on Tuesday they are planning to buy homes and rent them at affordable rates to reduce inventory and boost sales.

The move will be implemented by the city’s Linan district, which plans to acquire a total of 10,000 square metres, with flat sizes not exceeding 70 square metres.

That is a drop in the ocean nationwide, however, as unsold homes stood at 330 million square metres in 2023, the most since 2016, official data showed.

Unbuilt or delayed pre-sold homes numbered 20 million across the country in 2022, with 3.2 trillion yuan (US$443 billion) needed for their completion, according to Japanese investment bank Nomura.

Just two weeks ago, the Politburo, the top decision-making body of China’s ruling Community Party, said it was assessing comprehensive measures to reduce housing inventory and boost sales.

(Residential buildings under construction in Jinan, China, on May 9, 2024. Photo: Bloomberg)

“We view the initiative as encouraging, and think it will partly help with the absorption of excess inventory, particularly in lower-tier cities with subdued home demand,” said Jeff Zhang, an equity analyst at Morningstar.

But he said he is cautious about whether the measure will be extended to more cities.

“It may not be the best remedy to rescue the property market,” said Lu Ting, chief China economist at Nomura, who added that such measures will not remedy a lack of buyer confidence amid worries about unfinished homes and falling prices.

Ref: China property: government buying of unsold homes lifts sentiment but is no cure-all for market doldrums, analysts say (scmp)

Photo Credit-Bloomberg