The real estate crisis in China could be over. Real estate stocks rise | CNN Business

Hong Kong
CNN Business

The Chinese authorities are making their biggest effort yet to end the crisis in the country’s vast real estate sector, which has severely affected the economy over the past year.

Shares of China’s largest property developer Country Garden surged as much as 52% in Hong Kong after Beijing on Friday unveiled a 16-point plan. Significantly relieves campaign to lend to the sector.

Key actions include allowing banks to extend loans owed to developers, supporting property sales by reducing down payments and lowering mortgage rates, boosting other financing channels such as bond issues, and ensuring the delivery of previously sold homes to buyers.

According to Larry Hu, Macquarie Group’s chief China economist: “Basically, policy makers have asked banks to do their best to support the real estate sector.”

Tao Wang, UBS’s chief China economist, described the package of measures as a “turning point” for China’s real estate sector. Combined with other policies announced earlier this year, it could pump more than It was estimated that one trillion yuan ($142 billion) in real estate.

Hong Kong-listed Chinese developers jumped 11% on average on Monday, sending the broader market higher. Longfor Properties – another major developer – jumped 17% while shares Dexin China, a Hangzhou-based developer, is up 151%.

Many analysts view the rescue package as the strongest signal yet from the Chinese authorities that the two-year crackdown on the sector is now over. In August 2020, the government began trying to rein in excessive borrowing by developers to curb runaway home prices.

The problems escalated last year when Evergrande – the country’s second-largest real estate developer – defaulted on its debts. With the collapse of the real estate sector, many major companies have sought protection from their creditors. The cash crunch has resulted in the postponement or suspension of work on several previously sold housing projects across the country.

The crisis entered a new phase this summer when angry homebuyers refused to pay mortgages on unfinished homes, upsetting financial markets and raising fears of contagion. Since then, the authorities have tried to defuse the crisis Urging banks to increase loan subsidies to developers so that they can complete projects. Regulators also cut interest rates in an attempt to restore buyer confidence.

But the real estate slump continued, as buyers retreated from the market due to the weak economy and severe Covid restrictions. In October, sales of the top 100 real estate developers contracted 26.5% from a year ago, according to a special survey by China Index Academy, a major real estate research firm. So far this year, their sales are down 43%.

Combined with a strict non-proliferation policy that has curtailed manufacturing and consumption spending, real estate problems have crippled the Chinese economy. In the third quarter, China’s GDP grew 3.9% from a year earlier, putting overall growth for the first nine months at just 3%, well below the official target of 5.5% set in March.

And while analysts welcomed Friday’s measures, they remained cautious about its impact Buyer confidence.

“The real estate market is not yet showing signs of recovery,” Nomura analysts said in a research report on Monday, adding that recent actions may have a “little direct impact” on stimulating home purchases.

They added, “Beijing’s strategy to crack down on COVID, despite some recent fine-tuning, will continue to put the burden on the real estate sector.”

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