MNI: China Property Stimulus Seen Limited, Advisors Say

China is likely to announce only limited measures to boost its real estate sector, including renovation of sub-standard housing, despite market speculation of a major stimulus package ahead of the month-end politburo meeting, advisors and analysts told MNI, though they highlighted the significance of a move to allow cities to use national government funds to buy property. 

“There is limited room left following the sustained policy efforts of the past four years, but policymakers still need to act for the sake of stabilising asset prices,” said Liu Zhiqin, a senior researcher at Renmin University’s Institute for Financial Studies.

Speculation over the possible resumption of a programme to rebuild shanty towns sent property stocks to roughly nine-month highs in recent days, but the Central Urban Work Conference, held this week for the first time in a decade, proved to be a disappointment, with Liu noting that policymakers were unwilling to commit to massive demolitions and reconstruction like those carried out in 2015. 

SPECIAL TREASURY BONDS

Liu highlighted however the recent announcement by the National Development and Reform Commission that cities with population inflow will be allowed to use ultra-long-term special treasury bonds to acquire idle land and existing homes, in order to expand affordable housing supply for rural migrants.

“An important policy shift is that authorities are opening up the possibility of increased funding support from the central government,” he said, adding that about one-third or one-fourth of the annual quota for special treasuries could potentially be used for this purpose, providing up to a few hundred billion yuan initially.

Central government money could also attract private capital, said Liu, calling for private enterprises to purchase some of the housing for their employees at a time when they are cautious about expanding production.

Accessing the treasuries will be much easier and quicker for local authorities than relying on issuing their own special bonds, which are repaid by income streams from the investments they fund and are subject to performance evaluations, said Yan Yuejin, vice president at the E-house China Research and Development Institution.

The Central Urban Work Conference has set the tone for real estate policy during China’s 15th Five-Year Plan period from 2026-2030. People-oriented city governance will be the top priority, a shift from the previous emphasis on expansion in scale, said Liu, adding that developers may benefit indirectly from improvements in public infrastructure which could then boost home sales.

NO LARGE-SCALE DEMOLITION

Li Yujia, chief research fellow at the Guangdong Urban & Rural Planning and Design Institute, said that future programmes to renew urban villages will concentrate on eliminating safety hazards and improving liveability and affordability for migrant workers and young people, rather than on large-scale demolition and rebuilding, which would only add to oversupply.

Authorities are still likely to further expand their target for renovating one million urban village and dilapidated housing units, given mounting downside pressure on home prices, according to Yan. (See MNI: China To Boost Urban Renewal Funding To Drive Demand)

New home prices in 70 key cities fell 0.3% m/m in June, widening for the second month from May’s 0.2% drop, according to data by the National Bureau of Statistics. First-tier city prices declined 0.3% after falling 0.2% in May.  

Measures already taken to boost property sales by lowering downpayments and interest rates are losing effect, and further such moves will have a diminishing impact given the subdued outlook for prices, Liu said. He also saw little possibility that the city of Beijing would fully lift remaining restrictions on home purchases given its position as the national capital. (See MNI: China Likely To Lower Homebuying Down-payment Ratios)