Chinese Government Aims to Purchase Unsold Homes amid Persistent Property Crisis

China is reportedly contemplating a plan for local governments in various provinces to acquire millions of unsold homes as the country’s property market continues to struggle, according to a report from Bloomberg News.

Following the news, China’s CSI 300 index, a blue-chip index, experienced a 2% increase. The State Council is currently seeking feedback on the preliminary proposal from different provinces and government entities, as per individuals familiar with the situation mentioned in the report.

Under the potential plan, local state-owned enterprises would assist in buying unsold homes from distressed developers at significant discounts, facilitated by loans from state banks. The report suggests that a portion of these properties could then be repurposed into affordable housing options.

Chinese officials are currently deliberating on the plan’s specifics and viability. It is anticipated that finalizing the proposal could take several months if the country’s leadership decides to move forward with it, according to the report.

China’s property market has been grappling with significant challenges for several years. Despite multiple attempts to revitalize the sector through policy interventions since 2022, the industry, which accounts for a substantial portion of the country’s GDP, remains a key impediment to consumer spending and confidence.

Estimates indicate a substantial surplus of unoccupied apartments throughout China due to a boom-and-bust cycle in construction projects. To date, financial institutions have been hesitant to comply with Beijing’s urgings to increase credit support to the struggling sector, citing concerns over heightened risks of non-performing loans.