![[Housing Market Crisis]Some new formulations of Xi Jinping’s release of the “unbinding” signal of the property market attract attention | Xi Jinping | Top 20 | China’s economy | formulation | regulation | first proposed | property market slowdown | 100 cities in China | gold nine silver ten](https://img.soundofhope.org/2022-11/gettyimages-1435771431-1668400131704.jpg "[Housing Market Crisis]Some new formulations of Xi Jinping’s release of the “unbinding” signal of the property market attract attention | Xi Jinping | Top 20 | China’s economy | formulation | regulation | first proposed | property market slowdown | 100 cities in China | gold nine silver ten")
At present, most real estate enterprises in China are in a hurry with their own funds, and their refinancing is restricted, and they are frequently faced with the game of debt rollover. Under this circumstance, the latest statement from the CCP regulatory authorities supports the moderate extension of real estate development loans, trust loans and domestic debts.
The Wall Street Journal reported on Nov. 14 that as Xi moved to ease restrictions on the outbreak, he also signaled a reversal of real estate controls, acknowledging the economic pain and public dissatisfaction the two policies have caused.
China’s central bank and China Banking and Insurance Regulatory Commission have issued a broad set of measures aimed at boosting housing demand and supply, according to a circular circulated on Friday (Nov. 11) to Chinese financial institutions and officials involved in decision-making. People close to China’s central bank confirmed the document’s authenticity.
The new policies, signed by Mr. Xi, lift some of the previous restrictions aimed at reining in the debt of property developers and allow lenders to make loans to financially troubled homebuilders, according to officials involved in the decision-making.
According to a number of Chinese media reports on November 13, on November 11, 2022, the Central Bank of the Communist Party of China and the China Banking and Insurance Regulatory Commission jointly issued the “Notice on Doing a Good Job in Supporting the Stable and Healthy Development of the Real Estate Market” (“Notice”). On the side and the demand side, 16 measures have been identified to support the steady and healthy development of the real estate market, covering development loans, trust loans, M&A loans, loan extension, guaranteed property delivery, personal housing loans, personal credit investigation, and the leasing market.
According to a Caixin report on November 13, a banker revealed that the specification of the “Notice” is higher than before, releasing a “rescue” signal; although many places in the document only mentioned “encouragement”, in the actual implementation process , local regulators are likely to further intensify enforcement efforts and become more mandatory.
The real estate measures, combined with the easing of coronavirus restrictions, are a clear sign that Beijing is stepping up efforts to support economic growth, said Michael Hirson, head of China research at 22V Research, according to the Wall Street Journal.
While local governments across China have taken more modest steps to ease some of the pressure on real estate companies, the 16 new measures represent the biggest step yet by the Chinese government to save the real estate industry, the report said. The real estate industry has been a key pillar of China’s economic growth for decades. Real estate control measures have led to a decline in home sales, hurting the overall growth of the real estate industry.
Several first-time expressions attract attention
According to a report from China Business News, the 16 measures launched this time have a wide coverage, strong pertinence and strong policy strength. Some expressions are put forward for the first time. For example, if the supporting financing newly issued by Baojiao Building is not good, relevant institutions and personnel will be exempted from responsibility and increase exemption clauses. Another example is to encourage trust and other asset management products to support the reasonable financing needs of real estate. This is the first time that the support policy involves trust products. . These measures have given the real estate market a “reassurance”.
In the eyes of market analysts, the 16 New Deals have released an obvious policy signal: from “rescue projects” to “coexistence of rescue projects and rescue enterprises”, all kinds of channels for real estate financing will be dredged, and the real estate market will return to the normal track as soon as possible. Lay the foundation.
Wang Qing, chief macro analyst of Dongfang Jincheng, said that the “golden nine and silver ten” in the property market are not in good condition, and the credit risks of some leading real estate companies are still being exposed recently. The current rapid decline in commercial housing sales, real estate investment and housing-related consumption is causing a greater drag on the macroeconomic operation. The introduction of the 16 measures indicates that with the goal of guiding the real estate industry to achieve a soft landing as soon as possible, the financial support for the real estate policy has been comprehensively increased.
In addition, the “Notice” requires that financial institutions are encouraged to determine the specific down payment ratio and interest rate level for personal housing loans based on their own business conditions, customer risk status and credit conditions, etc. on the basis of the lower limit of urban policies; and encourage the impact of factors such as the CCP virus epidemic The deferred repayment of the principal and interest of the personal housing loan will not affect the personal credit investigation.
Wang Dan, chief economist at Hang Seng Bank China, also said the new measures were massive and amounted to targeted credit easing for China’s real estate sector. She sees the new measures in stark contrast to previous rounds of incremental support.
With developers’ loan repayment deadlines looming, regulators are eager to avoid systemic risks to the financial sector from a potential wave of defaults, Wang said. Even so, demand for home buying remains weak, and a reversal in sentiment in the property market could depend on the long-term outlook for the domestic economy, she said.
New measures not enough to avoid slowing housing market
The Wall Street Journal reported that Xi Jinping, who won a third five-year term at the 20th Party Congress, faces China’s worst long-term economic slowdown in decades as he consolidates his grip on the regime. China’s economic weakness is largely a direct result of two campaign-style measures taken by Xi Jinping, the anti-epidemic measures and, starting last year, to stifle a four-decade-long housing boom that officials have previously warned about The boom may have formed a bubble.
With a new leadership of Xi Jinping-loyal officials in place after the 20th National Congress of the Communist Party of China, Xi is moving toward a more coordinated approach to propping up the economy in response to heightened competition with the United States, the report said. part of a broader effort.
Larry Hu, an economist at Macquarie in Hong Kong, said there appeared to be more room for policy easing after the 20th Party Congress. He said a series of previous efforts had had little effect, and policymakers were now making a big push for credit to the real estate sector.
Credit has become a particular headache for developers, many of whom previously relied on heavy borrowing to build new projects and maintain operations. In the first nine months of this year, funds in place for Chinese property developers fell 24.5%, according to the National Bureau of Statistics of China.
However, the new notice, issued jointly by the central bank and the China Banking and Insurance Regulatory Commission, does not represent a complete reversal of Xi Jinping’s previous efforts to cool the real estate sector, the Wall Street Journal reported.
Dubbed as supporting the “stable and healthy development” of the real estate market, the notice still emphasizes the need to curb speculative property purchases, reiterating Xi’s slogan “Houses are for living in, not for speculation.”
Bruce Pang, chief China economist at Jones Lang Lasalle, said regulators are making an all-encompassing effort to achieve a soft landing for the real estate sector. However, he said the measures may not be enough to avoid a slowdown in the housing market, given their focus on improving liquidity for cash-strapped developers.
Real estate curbs have led to an increase in home defaults, a rise in bad bank loans, and a drop in home sales and investment, all of which have weighed heavily on overall economic growth in recent quarters.
China’s gross domestic product (GDP) grew by just 3.0% in January-September 2022, well below the full-year growth target of around 5.5% set by the Chinese government in March.
The Voice of America reported on November 7 that according to the latest statistics from the Beijing Middle Index Research Institute, the average price of newly built residential buildings in 100 Chinese cities reached 16,199 yuan per square meter in October, slipping for four consecutive months, a drop compared to September. narrowed by 0.01 percentage points. The average price of second-hand housing reached 15,945 yuan per square meter, also falling for 6 consecutive months, and the decline was 0.03 percentage points higher than that in September.
In addition, according to the latest data released by the National Bureau of Statistics of the Communist Party of China at the end of October, China’s commercial housing sales area, amount and construction funds from January to September fell by 22.2%, 26.3% and 24.5% year-on-year respectively, which is still bleak.
U.S. media reports pointed out that China’s housing market continues to be in the cold winter of “falling both in volume and price”, and Chinese people who want to sell or buy a house are deeply concerned.
Since the Beijing authorities suppressed the housing market with an iron fist last year, it has triggered a crisis of unfinished buildings including Evergrande and other builders going bankrupt or even failing to deliver on schedule.
The possibility of a wave of bankruptcies among real estate developers is the biggest risk facing China’s housing market right now, the ABC reported.
That’s not alarmist: Chinese developers typically borrow a lot of money to finance ongoing construction. While the industry’s average debt-to-asset ratio is around 65%, some leading companies have even higher debt-to-asset ratios. The industry’s developers’ current ratios (their ability to service short-term debt) are gradually declining, suggesting overall lower liquidity, making the industry vulnerable to financial shocks.
Risks in the real estate sector could also spill over into the wider economy through banks and local governments, the two largest entities supporting China’s economic growth.
Banks lend to both homebuyers and developers, so if the housing market collapses, banks could face a surge in bad debts.
On the other hand, real estate development accounted for only 6.2% of the total loan volume of Chinese banks. Even so, a major default event could lead banks to tighten lending conditions, leading to a further drop in market liquidity.
The local government of the Communist Party of China relies heavily on the sale of land to generate income. Therefore, if a stable income stream cannot be obtained from land sales, it will affect the local government’s investment and urbanization projects. This will further drag on China’s recovery from the new crown epidemic. China’s economy is already in trouble due to Beijing’s insistence on a “dynamic clearing” policy.