Chinese Property Developers Soar on Plans for Government Purchase of Unsold Homes

Shares of Chinese property developers saw a notable surge following reports that China is contemplating a proposal for local governments to acquire millions of unsold homes from struggling companies. This initiative aims to alleviate the prolonged property crisis in the country.

On Thursday, Hong Kong’s Hang Seng Mainland Properties Index witnessed an increase of up to 6.3% during the trading session. State-backed Sino-Ocean Group settled 46% higher, while private developers like CIFI Holdings jumped 29% and Shimao Group rose 17%.

With Hong Kong markets closed on Wednesday for a public holiday, they have been catching up with the gains seen in mainland property shares from the previous day. China’s CSI 300 Real Estate index rose over 3% on Thursday, following a 2.2% upsurge on Wednesday.

According to Bloomberg News, the State Council is in the process of gathering feedback on the initial plan from various provinces and government entities. The proposal emerged following an April meeting of the ruling Communist Party leaders, which emphasized the need to address the growing housing inventory.

The plan involves local state-owned enterprises assisting in purchasing unsold homes from distressed developers at significant discounts, facilitated by loans from state banks. A key aspect of the proposal is the transformation of many of these properties into affordable housing units.

Facing a debt crisis since mid-2021, China’s property sector has been grappling with multiple policy interventions since 2022. Despite these efforts, the sector, which holds substantial weight in the economy, continues to hinder consumer spending and confidence.