China’s central bank has backed the government’s plans to use public resources to absorb the nation’s unsold homes as it moves to remove an inventory overhang in the world’s largest property market, which a data provider said could take as long as 18 months to work through.
People’s Bank of China (PBOC) on Wednesday held a virtual meeting on the topic, on the heels of Beijing’s announcement last month of a 300-billion-yuan (US$41.5 billion) fund to help clear excess housing stock.
The meeting was attended by major national banks and top officials from provincial cities, who discussed follow-up measures on the fund, which is earmarked for repurchasing unsold homes nationwide.
Beijing’s efforts to accelerate the clearance of excess inventory and shore up the real estate market, which accounted for a quarter of the country’s economic growth at its peak, have gathered pace since the launch of the fund.
At least 10 major Chinese cities including Shanghai, Guangzhou, Shenzhen, and Hangzhou, have issued statements to encourage local state-owned enterprises to clear unsold home inventories.
Early indications were disappointing. Data from China Real Estate Information Corporation (CRIC) showed that only four out of 30 major cities showed signs of improvement in destocking trends in May compared with the previous month. CRIC said that 20 of the cities are expected to take more than 18 months to reduce stockpiles.
The central bank emphasised the need for financial institutions to implement the Communist Party Politburo’s policy to support the property market and preserve financial stability in the world’s second largest economy.
PBOC officials said during the meeting that setting up of the relending fund is an important step to clear home inventories, and optimise existing stocks and would also help promote the formulation of a new model for property development. This will also benefit housing delivery as it follows the “whitelist” programme, launched earlier this year, under which national lenders finance select projects.
The relending policy should be implemented in a “market-oriented” way, the central bank added, emphasising that it should also adhere to principles of “voluntary participation, demand-based purchasing, and reasonable pricing” and avoid the addition of hidden debts.
The central bank’s Governor Pan Gongsheng and Deputy Governor Tao Ling, spoke at the meeting which was also attended by officials from National Financial Regulatory Administration, China Development Bank, and major national commercial banks.
Top officials from Jinan, Tianjin, Chongqing, and Zhengzhou, which were involved in a similar 100-billion-yuan pilot relending programme last year, also spoke at the meeting. As at the end of March, only 2 billion yuan had been drawn down under this trial with China’s property market yet to see any signs of a turnaround.