Chinese officials signaled their growing alarm over the country’s worsening property market on Friday, unveiling a plan to step in to buy up some of the vast housing stock and announcing even looser rules for mortgages.
The flurry of activity came just hours after new economic data revealed that Chinese authorities are staring at a hard truth: No one wants to buy houses right now.
Policymakers have tried dozens of measures to entice home buyers and reverse a steep decline in the property market that has shown few signs of recovering soon.
On Friday China’s vice premier, He Lifeng, indicated a shift in the government’s approach to dealing with a housing crisis that has prompted households to cut spending. Mr. He told policymakers that local governments could begin to buy homes to start dealing with the huge numbers of empty apartments.
The government-purchased homes would then be used by authorities to provide affordable housing. Mr. He did not provide any details on when such a program would begin or how it would be funded.
The approach is similar to the Troubled Asset Relief Program, or TARP, that the United States government established in 2008 to buy troubled assets after the collapse of the American housing market, said Larry Hu, chief China economist for Macquarie Group, an Australian financial firm.
“The policymakers realize that the demand side stimulus is not enough,” said Mr. Hu. “So they have to step in as a buyer of last resort.”
Even so, China’s central bank on Friday took steps to encourage home purchases by effectively lowering mortgage interest rates and slashing requirements on down payments.
“Policymakers are desperate to boost sales,” said Rosealea Yao, a real estate expert at Gavekal, a China focused research firm.
The government’s official data shows that Beijing has a long way to go to increase confidence in the real estate market. The amount of unsold homes is at a record high, and property prices are declining at a record pace.
The inventory of unsold homes was equivalent to 748 million square meters, or more than 8 billion square feet, as of March, according to China’s National Bureau of Statistics. In April, new home prices in 70 cities fell by 0.58 percent, and the value of existing homes fell by 0.94 percent. The price drops were even more stark in yearly terms: New home prices fell 3.51 percent compared to a year ago, while existing home prices fell 6.79 percent, both record breaking declines.
China’s property crisis has been fueled by years of heavy borrowing by property developers and overbuilding that underpinned much of the country’s remarkable decades-long economic growth.
But when the government finally intervened in 2020 to put an end to risky practices by developers, many companies were already on the precipice of collapse. One of its biggest property developers, China Evergrande, defaulted in late 2021 under huge piles of debt. It left behind hundreds of thousands of unfinished apartments and bills worth hundreds of billions of dollars.
Evergrande was the first in a string of high-profile defaults that now punctuate the industry. A Hong Kong court ordered the company to be liquidated in January. Another beleaguered real estate giant, Country Garden, had its first hearing on Friday in a Hong Kong court in a case brought by an investor seeking the company’s liquidation.
Siyi Zhao contributed research.