China’s Housing Official Urges Enhanced Efforts to Revive Real Estate Sector

China’s Minister of Housing and Urban-Rural Development, Ni Hong, has called for stronger measures from financial regulators and lenders to revitalize the country’s struggling property sector. In a recent meeting with property developers and builders, Minister Ni Hong proposed considering homebuyers who have paid off previous mortgages as first-time purchasers.

Currently, buyers with a mortgage history but without a property face higher down-payment rules. This move is part of the government’s efforts to stabilize the property market, which is a vital component of the world’s second-largest economy.

The property market crisis in China has been hindering the country’s economic recovery and has prompted expectations for additional government actions to stimulate demand. Home sales experienced further declines in June after a brief rebound earlier in the year, putting pressure on debt-laden developers and reducing demand for resources like iron ore.

Minister Ni Hong also urged for more measures, such as relaxing down-payment rules and reducing mortgage rates for first-home purchasers. Currently, purchasers of second homes are subjected to more restrictive borrowing limits.

The banking sector now holds a key role in implementing these measures. Earlier this month, financial regulators increased pressure on banks to ease terms for property companies by encouraging negotiations to extend outstanding loans. The aim is to ensure the delivery of homes under construction.

In a potential move to boost demand in China’s biggest cities, authorities are reportedly considering easing homebuying restrictions that have limited demand in cities like Beijing and Shanghai for years.

Minister Ni Hong’s meeting with developers followed signals from China’s top leaders that they would ease property policies. The government’s official readout of a Politburo meeting omitted President Xi Jinping’s long-used slogan “housing is for living, not for speculation,” indicating a shift toward supporting the property market.

Ni expressed the government’s strong support for home purchases to meet essential dwelling demand and the need for better housing. He also called for tax and fee relief for housing upgrades and replacements.

Stabilizing the construction industry and the real estate sector is crucial in promoting economic recovery, as both sectors play a significant role in the economy.

Despite policy efforts to reduce benchmark rates and mortgage rates, most Chinese households have not yet felt the benefits, as banks won’t reprice existing loans until the beginning of the next year. The policy push may impact earnings at banks already facing shrinking margins and tepid loan demand.

Some analysts are also concerned about the growing risks associated with debt-laden local government financing vehicles (LGFVs), as exposure to LGFVs could weaken capital positions and lead to lower dividend payouts for lenders. Market sentiment remains subdued as effective measures have yet to be fully implemented. The government appears to be preparing for further policy relaxation to address the challenges in the real estate sector.

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