China Home Sales Slump Eases After New Government Support

(Bloomberg) -- The downturn in China’s residential real estate market weakened in May, suggesting that the government’s recent efforts to revive the market are beginning to take hold.

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The value of new-home sales from the 100 biggest real estate companies dropped about 33.6% from a year earlier to 322.4 billion yuan ($44.52 billion), compared with a 45% decline in April, according to preliminary data from China Real Estate Information Corp. Transactions gained 3.4% from April.

The green shoots came after the central government in mid-May announced an initiative for local authorities to purchase unsold homes and loosen home-buying rules. Three of China’s biggest cities — Shanghai, Shenzhen and Guangzhou — have since rolled out major easing for homebuyers, slashing downpayment requirements and allowing room for cheaper mortgages.

China’s housing slump is into its third year, weighing on the world’s second-largest economy and exacerbating a liquidity crisis among developers. Policymakers are trying to revive sentiment among homebuyers who are worried about falling prices and unfinished apartments.

Looking ahead, the latest stimulus package will likely help stabilize transactions in June as developers make their mid-year sales push, Bloomberg Intelligence property analyst Kristy Hung wrote in a note on Thursday.

The central bank is providing 300 billion yuan to address the inventory overhang. China has the equivalent of 60 million unsold apartments, which will take more than four years to sell without government aid, according to Bloomberg Economics.

Recently loosened mortgage policies will fuel housing demand in the short term by enhancing affordability, but a sustainable sales improvement is unlikely because of the modest economic growth outlook, Moody’s Ratings analysts led by Kelly Chen wrote in a note.

The plan to buy unsold homes “can provide liquidity to financially stressed developers, but its scale is insufficient to substantially reduce existing housing inventory,” they said.

--With assistance from Evelyn Yu.

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