Effectiveness of China's new property policies remains uncertain: Fitch

May 22, 2024 (MLN): The impact of recent policy moves including local state-owned enterprises’ (SOEs) home-buying plans and some higher-tier cities’ removal of purchase curbs on reviving national home sales remains uncertain, says Fitch Ratings.

The People’s Bank of China (PBoC) announced a CNY300 billion relending programme on May 17, 2024, to allow local SOEs to acquire completed but unsold residential properties and convert them for social housing, echoing the politburo’s earlier emphasis on tackling the nation’s excess housing stock.

PBoC expects the programme could lead to total bank lending of CNY500 billion.

Prior to the PBoC announcement, over 50 cities had rolled out “sell old, buy new” schemes, some of which involve local SOEs acquiring secondary homes that will then be used as public housing or long-term rental apartments.

However, the visibility is low about the scale and effectiveness of such schemes.

Fitch believes the elimination of purchase restrictions, along with PBoC’s recent easing measures, may help to stabilise home sales in the higher-tier cities amid their stronger economic, demographic and fiscal fundamentals, but the boost to nationwide sales remains uncertain.

There could be housing demand outflows from lower-tier cities due to policy easing by their higher-tier peers. Currently only the four Tier-1 cities, Tianjin and Hainan still have purchase curbs in place.

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