Dismayed by the millions of unsold homes in China’s troubled real estate market, authorities are buying some properties and turning them into public housing, Reuters reported.
Riding to the rescue of distressed developers, a handful of local governments are snapping up thousands of empty homes at hefty discounts and reselling them to the country’s poorest households.
However, this won’t entirely cure China’s huge glut of housing.
At the end of May, unsold residential floor space totaled 657 square kilometers, National Bureau of Statistics figures show.
That is the most unsold space in at least two years, and an area nearly the size of Singapore.
The new policy being tested in at least six provinces benefits many parties.
Low-income households gain from a bigger supply of subsidized homes, the government boosts its poverty alleviation work, developers deplete an oversupply of houses that has dampened prices, and crucially, China’s cooling economy gets a fillip from a healthier property market, the report said.
However, government purchases of homes — at discounts of between 10 percent and 52 percent — add to a mountain of public debt and do little to discourage the next housing bubble.
In the Inner Mongolia city of Ordos, notorious as a “ghost town” after a building frenzy failed to attract buyers and residents, authorities in Dongsheng district bought houses in April and May.
Online documents showed authorities, through tenders, bought 3,660 housing units from eight developments in May for between 2,766 yuan (US$446) and 3,612 yuan per square meter.
“We will watch the housing supply situation,” the report quoted an official at the Dongsheng housing authority who declined to be named as saying.
“If there is a need, we will buy again.”
The government’s foray comes at a time China’s struggling housing market appears to be stabilizing.
New home prices edged up for the first time in 13 months in May, suggesting the property market may be bottoming out.
“If the inventory can be gotten rid of more quickly, it will ease the stress on developers’ funding,” Zhu Jianfang, chief economist at CITIC Securities, was quoted as saying.
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