China’s commitment to nearly double the loan quota for unfinished residential projects to ¥4 trillion ($562 billion) fell short of market expectations, leading to a decline in property shares as investors anticipated more robust policies. The government established a new year-end loan target for “white-list” property projects after distributing ¥2.23 trillion as of October 16. This measure, designed to ensure the completion of homes, was among several initiatives announced during a briefing on Thursday.
The plans did not meet expectations, with some analysts describing them as “incremental.” A Bloomberg index of property stocks in Hong Kong dropped over 8%, and Chinese stocks lost earlier gains. Authorities are challenged to reinvigorate a struggling stock market rally, even though Housing Minister Ni Hong and other officials expressed confidence in the government’s ability to halt the decline in the real estate sector. They noted that China’s residential market is beginning to stabilize. Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, observed that policymakers are adopting a more pragmatic approach to the property sector. He stated that it is expected “to be neither a driver nor a drag on economic growth, but a stabilizer moving forward.”
The “white-list” program is part of a government strategy to ensure unfinished homes are delivered to buyers and prevent another widespread mortgage boycott. Nomura Holdings Inc. estimates that delivering China’s sold but unbuilt homes, approximately 48 million units, will require around 3 trillion yuan of direct funding from the central government.
China is also considering allowing banks to issue loans for purchasing idle land and increasing affordable housing support for families with two or more children. Additionally, the government plans to renovate 1 million homes in older, rundown areas of large cities. This initiative follows previous government efforts to renovate shantytowns, although on a smaller scale compared to projects between 2016 and 2018. Raymond Cheng, head of China property research at CGS International Securities Hong Kong, commented that the “market may be disappointed about no concrete number for special bonds for buying unsold units.” Thursday’s announcements followed a series of earlier policies by the central government to help the world’s second-largest economy meet its growth target of around 5% for the year.