Chinese officials unveil plans to purchase a portion of the country's massive housing inventory, ease lending regulations, and commit to delivering unfinished houses in response to its deteriorating real estate market.
According to the New York Times, the plans were announced on Friday, May 17, shortly after new economic statistics suggested that people do not want to purchase properties right now. Apparently, this sharp housing market downturn shows little indication of recovery.
China's Vice Premier Suggests Reform in Housing Policy
China still has more work to do until the real estate market is more confident, according to official government statistics. Home prices are falling at an unprecedented rate, and the number of unsold properties is also at an all-time high.
He Lifeng, China's vice premier, hinted at a policy change regarding the country's housing issue, Reuters reported. As a first step toward addressing the growing number of vacant apartments, he suggested to lawmakers that local governments consider purchasing residences. Authorities would then use the houses the government bought to offer affordable housing.
Meanwhile, the People's Bank of China relaxed mortgage interest rates and reduced down payment requirements in an effort to boost property sales.
China's Housing Problem Having Detrimental Impact on Economy
Overbuilding and years of excessive borrowing by developers have contributed to China's housing problem, which in turn has weakened the country's economy.
As of March, the National Bureau of Statistics in China reported that the inventory of unsold residences was 748 million square meters, which is more than 8 billion square feet. In April, the value of existing houses was down by 0.94%, while the price of new homes decreased by 0.58% in 70 cities.
Looking at the losses year-over-year, the price drops were even more dramatic. Existing house prices plummeted 6.79%, and new home prices declined 3.51%, both of which were record lows.
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