These and other measures announced Friday marked Beijing's latest efforts to address issues in the massive real estate sector.
The People's Bank of China will provide 300 billion yuan ($42.25 billion) to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.
Also Friday, the PBOC removed a floor on mortgage interest rates, and lowered the minimum down payment ratio for first- and second-time home buyers.
BEIJING — Chinese authorities on Friday pledged new support for state-owned enterprises to enable them to buy unsold apartments, in an effort that could help developers get more funding to finish construction on pre-sold properties.
These and other measures announced Friday marked Beijing's latest efforts to address issues in the massive real estate sector.
"I think it is encouraging that the policy is taking a turn of direction trying to support the housing market," said Zhu Ning, a professor of finance at Tsinghua University and author of the book "China's Guaranteed Bubble."
People's Bank of China Deputy Governor Tao Ling told reporters at a briefing Friday the central bank would provide 300 billion yuan ($42.25 billion) to financial institutions to lend to local state-owned enterprises (SOEs) so they can buy unsold apartments that have already been built.
The central bank expects the support to release 500 billion yuan in financing for such purchases, which the SOEs could turn into affordable housing.
The real estate companies can then use funds earned from those sales to complete construction on other apartments, the central bank said.
As for unfinished, pre-sold properties, the National Financial Regulatory Administration Deputy Director Xiao Yuanqi told reporters that commercial banks have provided 935 billion yuan in loans to finish construction on whitelisted projects since the program was released in January.
"The government's purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery," Larry Hu, chief economist at Macquarie, told CNBC. "Finally the government stepped in as the buyer of the last resort."
"At this stage, it's mainly SOEs and local governments to implement the policies, but their resources may be too limited to move the needle at the macro level," he said. "Later on, we might see more efforts from the central government."
Developers "that must go bankrupt should go bankrupt, while those that need to be restructured should be restructured," Dong Jianguo, deputy head of the ministry of Housing and Urban-Rural Development, told reporters in Mandarin, translated by CNBC. He said homebuyers' interests and rights should be prioritized, and those that violate the law should be punished.
I don't know if it is "capitalism" per se, but it is the same kind of behavior as seen in capitalist countries. It is 100% a bailout.
Is it? based on what? the only financial impact of this is, again, to transfer social wealth to property owners.
Great, they lowered the barrier-to-entry for getting into debt. They haven't lowered the inflated prices on the housing.
By allowing developers to build more housing, they increase the supply of housing. Increased supply necessarily lowers cost.
But there are already a lot of unsold housing units. That is the asset that the SOEs are purchasing from the real estate companies.
The issue isn't supply, it's that the prices of the existing supply are too high for people to buy - because real estate has been used as a wealth growth vehicle in China exactly the same as in the US.
We've already tried this in the US - giving money to developers to increase the supply of housing. It hasn't worked here, I'm not sure why it would work there unless the government actually caps the price of new units in order to force the construction of affordable housing.
Without additional regulation, this action is a wealth transfer, and nothing more.
Prices are falling for 2+ years now but they are very careful about it being gradual and controled. De-marketizing some housing stock (paying bellow market rates per unit mind you) by absorbing them into affordable state owned public housing initiatives will also relieve inventory while facilitating demand. Increasing the share of public housing is an obvious way to control prices and kneecap speculation potential in the sector going forward. The built housing is already there so making it public is an obvious step. The barriers and regulations against speculation ,overbuilding and corruption going forward for these private entities are a whole different thing and China has been pretty strict recently during this controled deflation of the sector