China unveils new property support measures amid concerns about Evergrande fallout

A state-backed property project in China has received the first development loan under a so-called whitelist mechanism and two more major cities have eased home-buying curbs, state media reported, as concerns mount about the liquidation of Evergrande.
The latest measures add to a string of policies deployed by the world’s second-largest economy over the past year to help revive the property sector, which accounts for a quarter of China’s GDP and has been hit by an unprecedented debt crisis after a regulatory crackdown on the sector’s high leverage.
Despite those measures, the property market ended last year with the worst declines in new home prices in nearly nine years, casting a shadow over hopes of broader economic recovery and renewing investor demands for stronger policy initiatives.
Analysts say a Hong Kong court placing property giant China Evergrande Group (3333.HK), opens new tab into liquidation could worsen the demand outlook as homebuyers take a cautious approach given uncertainty about the health of other private developers.
Two of China’s major cities, Suzhou and Shanghai, followed Guangzhou in easing home-buying restrictions, official media reported on Tuesday, in an effort to boost demand from homebuyers.
Investors were not excited by the new support, however, with Hong Kong’s Hang Seng Mainland Properties Index (.HSMPI), opens new tab and China’s CSI 300 Real Estate Index (.CSI000952), opens new tab falling 2.1% and 2.5%, respectively, on Wednesday.
In another support measure, a loan worth 330 million yuan ($46 million) to a state-backed development was approved just a few working days after the government announced the “project whitelist” mechanism, the official Securities Times reported on Wednesday.
Under the mechanism, city governments should provide a list of local property projects suitable for financing support, and coordinate with local financial institutions to meet the financing needs of these projects.
Securities Times said Nanning city in Guangxi region had provided its first “project whitelist” to local financial firms containing 107 developments. A project by state-backed Guangxi Beitou Industry & City Investment Group was granted a development loan from China Mingsheng Banking Corp (600016.SS), opens new tab.
The southwestern city of Chongqing also has come up with a whitelist of 314 projects, with a total of 83 billion yuan in financing required, according to the official Wechat account of the city’s housing authorities.
The first batch of projects on that whitelist include those by private developers Longfor Group (0960.HK), opens new tab and Huayu Group, as well as state-backed Cina Vanke (000002.SZ), opens new tab, the authorities added. The three property firms are deemed by the market as financial healthy.
The rollout of funding support under this mechanism is being closely watched by a market reeling from a debt crisis since mid-2021 which resulted in unfinished homes and defaults, especially among privately owned developers.
Many analysts expect it will take a long time for the property market to stabilise.

HOMEBUYER SENTIMENT

The new measures come as analysts weigh the impact of the court’s order to put Evergrande, once China’s top-selling developer into liquidation with more than $300 billion in liabilities.
“We think that home-buyer concerns about purchasing pre-sold units from financially troubled developers that might not deliver the project in a timely fashion – that is a major reason that home sales are still sluggish,” said Christopher Beddor, deputy China research director at Gavekal Economics.
“If nothing else, the headlines of the ordered liquidation in Hong Kong, that’s not going to have a great impact on homebuyer sentiment.”
The unfinished homes promised to buyers by Evergrande are, however, likely to be delivered because the government was making this a top priority for all developers, said Jonathan Krane at Krane Shares in New York.
“The long-term impact is that real estate will account for a smaller portion of China’s economy, to be replaced by other industries such as technology and consumer products and services,” Krane said.
Besides the impact on home sales, S&P Global Ratings said in a report published on Wednesday Evergrande’s offshore creditors stand to receive a potentially tiny payout in a complicated liquidation process that could take years to play out.

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