Faced with the continuous fall in real estate sales for a year and a half, the Chinese authorities have decided to change gear: in mid-November, the People’s Bank of China (the central bank) published a sixteen-point plan calling for easier financing healthy promoters. Ten days later, the main Chinese banks promised to lend at least 1,280 billion yuan (174 billion euros) to Chinese promoters. Objective: to give air to a sector responsible for around a quarter of Chinese growth.
Since the beginning of this crisis, the central bank has lowered its key rates several times to increase available liquidity. Local governments, on the other hand, facilitate the purchase of residences, principal or secondary, by playing on the initial rate of contribution required or the opening of the market to non-residents of the city. Without much success so far: sales continue to fall every month: in the first eleven months of the year, transactions of the top hundred Chinese developers fell by 42.6% compared to 2021, according to China Real Estate Information Corp. Investments in the sector fell by 8.8% over the first ten months of the year.
This time, the authorities want to cancel the negative effects of a reform adopted in mid-2020, prohibiting banks from lending to the most indebted promoters. The new measures will release significant funds for good performers, hopefully enough to support the sector. Bad students, on the contrary, like Evergrande and Sunac, which have defaulted on several debt maturities over the past year, will not have access to these funds. Part of these sums will also have to allow the resumption of projects abandoned by over-indebted companies. Clearly, it is not a question of forgetting the commitments made in mid-2020 to clean up a sector doped with indebtedness, but rather of negotiating a “soft landing”according to central bank governor Yi Gang.
A worrying property tax
Sector players hope that this influx of cash will finally allow a recovery: “I think we should soon hit bottom: on sales volumes and prices, we are still falling, but the decline is slowing down. We hope to see things improve by the second half of 2023. However, there is a strong divergence between the attractive metropolises, where prices are already rising, and the smaller cities where demand is very low.”notes Xie Yifeng, president of the China Urban Real Estate Research Institute.
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