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China property support to ‘ease near-term pressure’
The latest measures announced by Chinese authorities to revive the real estate sector should provide "some near-term relief" for property developers and banks, a report by credit rating agency Moody's said today.
© Lusa
Economia Moody's
Moody's considered that the initiatives "will stimulate demand for properties and reduce the number of available homes, helping to stabilize the market" in the Asian country, which is immersed in a prolonged real estate crisis, something that has weighed on the economic recovery.
"We expect the latest support measures to help alleviate some of the near-term pressures in the property market, while also helping to smooth out the sector's deleveraging and reduce systemic risks," said Kelly Chen, an analyst at the rating agency.
Chinese authorities announced on Friday about $42.25 billion (€39 billion) in loans for subsidized housing projects or reducing down payments required to buy homes, while urging local governments to buy undeveloped land or unsold properties from real estate developers.
Moody's considered that the easing of mortgages "is unlikely to lead to a sustained and sharp improvement" in new home sales, given the modest growth outlook and increasing supply in the second-hand property market.
The agency also predicts an improvement in the quality of banks' assets as the market stabilizes, although it warns of the increase in contingent liabilities of local authorities if they issue debt to buy unsold inventory from real estate developers.
Moody's considered that the scale of the proposal seems to be insufficient to reduce the existing inventory.
The financial situation of many Chinese real estate companies worsened after Beijing announced, in August 2020, restrictions on access to bank financing for developers who had accumulated a high level of debt, including Evergrande, with liabilities of almost $330 billion (€304 billion).
The government has since announced several support measures, with state-owned banks also opening multi-million dollar credit lines to several developers, aiming to support the completion of projects sold off-plan.
An issue that worries Beijing due to its implications for social stability, since housing is one of the main investment vehicles for Chinese families' savings.
However, the market is not reacting: commercial sales measured by floor area fell 24.3% in 2022 and another 8.5% in 2023.
Read Also: Moody's maintains Portugal's rating at 'A3' with a stable outlook (Portuguese version)
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