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Chinese real estate stocks are rallying as more cities announce rescue measures

Shares of Chinese real estate developers rose on rising expectations that Chinese governments would help buy up excess housing to revive the struggling real estate sector.

Shares of Chinese real estate developers rose on rising expectations that Chinese governments would help buy up excess housing to revive the struggling real estate sector.

The Hang Seng Mainland Properties Index, which tracks Chinese property developers listed in Hong Kong, rose 5.6% in afternoon trading on Thursday. Sino-Ocean and CIFI rose 46% and 29%, respectively, while Longfor, China Vanke, Agile and Sunac China each rose more than 10%.

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The Hang Seng Mainland Properties Index, which tracks Chinese property developers listed in Hong Kong, rose 5.6% in afternoon trading on Thursday. Sino-Ocean and CIFI rose 46% and 29%, respectively, while Longfor, China Vanke, Agile and Sunac China each gained more than 10%.

The gains were fueled in part by news Wednesday that officials in Hangzhou, a major city near Shanghai, said they would begin buying private housing units in a district with an oversupply of housing and use them for public housing . Similar plans announced Thursday in the far western city of Dali also helped.

The moves came just days after the city of Nanjing said it would help renovate or buy houses to create social housing, while Foshan, a mid-sized city near Hong Kong and Macau, said it would will encourage state-owned companies to participate in housing trading. in program.

Analysts said that overall the plans, while limited to a handful of cities, were significant. They come weeks after senior officials in Beijing signaled a major policy shift focused on absorbing China’s excess housing supply and creating more social housing.

At the time, analysts said Beijing appeared to be setting the stage for rescue efforts that could range from an unprecedented easing of home-buying restrictions to billions of dollars in government spending to buy up existing housing stock. If the government manages to acquire a significant amount of unsold houses from developers, especially those privately owned, it would solve the problem of overstock and channel funds to cash-strapped developers, they said.

Morningstar analyst Jeff Zhang said Hangzhou may want to test the trade-in program in a county where inventory clearance is more urgent. If Dali follows suit, “we expect more cities to increase government purchases of existing homes, particularly lower-end homes where home sales fell more sharply,” he said.

“Policies have clearly become more encouraging,” Nomura analysts Jizhou Dong and Riley Jin said in a note, noting in particular an easing of home purchase restrictions in blue-chip cities in recent weeks that there is further scope to support the real estate sector and it It is “now up to the central government to initiate sensible measures”, such as the acquisition of unsold houses.

China’s real estate sector has been in crisis for years. A slowing economy and weak consumer sentiment have caused many real estate developers’ sales to fall sharply, leaving them in a liquidity crisis. Unable to tap debt markets, many developers have defaulted on loans and bond payments, and some have even gone bankrupt.

Beijing has previously tried to revive the real estate sector by giving citizens cheaper home loans and easing restrictions on home purchases. However, those efforts were unsuccessful, prompting authorities to mention a shift to absorbing excess housing supply as a solution to the housing crisis at last month’s Politburo meeting.

Write to Jiahui Huang at [email protected]

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