MNI: China To Raise Local Bonds To Aid House Destocking
MNI (BEIJING) - Beijing will increase local government special bond issuance next year to fund the purchase of unsold homes and idle land for affordable housings, as policymakers aim to stem property market declines, advisors told MNI, pushing back against the feasibility of a national real-estate fund.
“The scale of local special bonds is likely to reach about CNY4.5 trillion next year, up from this year’s CNY3.9 trillion,” said Xu Hongcai, deputy director at the China Association of Policy Science’s Economic Policy Commission, adding authorities must pursue a moderate pace of debt expansion.
Some economists have called for a national fund to buy up surplus housing and land to address mounting stock, but Xu believes local special bonds will be more efficient, pointing to the difficulty distributing funds fairly.
Authorities have in recent months expanded the use of local special bonds to the acquisition of houses and land. The bonds, which have typically funded past infrastructure projects, have suffered from slower issuance due to a lack of profitable construction projects.
A researcher at a government-backed think tank said the bonds complimented city-specific housing policy and negated the need for a national fund, but their primary purpose was not aimed at the real-estate sector. The amount of the funds raised by local special bonds that will be used for housing acquisition was difficult to predict, but will be relatively limited, the advisor added.
Beijing is likely to prioritise central-level funding options, such as special treasury bonds, to target consumption and support major national construction and security projects over housing, the advisor continued.
Increased local bond issuance will accelerate de-stocking and hasten the government’s scheme to renovate one million urban village homes, said Li Yujia, chief research fellow at the Guangdong Urban & Rural Planning and Design Institute.
Advisors previously told MNI that funding shortages driven by lenders’ concerns over debt repayments amid falling house prices had hindered the government’s renewal and acquisition plans. (See MNI: China’s Property Measures Face CNY2 Trln Funding Gap)
ASSET PRICES
The Central Economic Work Conference’s call last week for greater housing and stock market stability would require continuous policy measures to reinforce the recent property rebound, the advisor noted, adding authorities will likely further relax home purchase limits in major cities and reduce mortgage rates.
New urbanisation that settles young people and moves rural residents to cities will help release longer-lasting demand, the advisor said, adding more equitable social services and increasing support for low-income groups should also be provided in timely manner.
The CEWC’s unusual joint call for property and stock market stability was driven by concern over short selling of Chinese assets amid external uncertainties, such as Beijing-Washington relations, and China’s transition away from its old growth model, Li said.
The new home price index for first-tier cities stopped falling in November, at 0.0% m/m, for the first time in 13 months, while declines in second- and third-tier cities have significantly narrowed, as policy works to restore confidence, he added.
Property market stabilisation has become more important as policymakers shift priority to expanding consumption, Li continued, noting house sales will amplify the effect of the consumer trade-in programme. (See MNI: China To Issue More Bonds As Stimulus Targets Consumption)