China Injects Billions into Troubled Property Market

China's ongoing property crisis, which began in 2021, has prompted significant interventions by Chinese authorities to stabilize the sector and mitigate its impacts on the world's second-largest economy. 

The People's Bank of China (PBOC) announced a $41.5 billion facility to support affordable housing initiatives. This fund is intended to assist local state-owned enterprises in purchasing unsold homes. 

This move aligns with statements by some senior politicians encouraging local governments to buy properties at reasonable prices and resell them as affordable housing.

To stimulate the property market, the central bank also abolished the minimum mortgage rate and reduced the minimum down payment for first-home buyers from 20% to 15%. 

The down payment requirement for second homes was lowered from 30% to 25%. These measures come amid a backdrop of declining home prices. New home prices fell for the tenth consecutive month in April, marking a 0.6% month-on-month decline—the steepest since November 2014.

The financial struggles of property developers in China can be traced back to 2021, when the government imposed restrictions on borrowing by major real estate firms. This regulatory tightening has led to several large developers defaulting on their debts. A Hong Kong court ordered Evergrande, the world's most indebted property developer, to liquidate in January.

These efforts reflect China's broader strategy to address the severe financial squeeze on its property developers and stabilize a sector that has been a key driver of economic growth until recent years. The combination of financial support and regulatory adjustments aims to revitalize the property market and support broader economic stability.