In a joint circular issued late last week, the People's Bank of China (PBOC) and the National Financial Regulatory Authority of China (NAFR) said they would boost the supply of rental housing in major cities, where home prices are out of reach for most young workers.
According to SCMP , this move comes as the housing market in the world's second largest economy continues to plummet and demand for homes is decreasing.
The circular also emphasizes that authorities need to facilitate structural reforms to the supply of rental housing in the market, to ensure abundant and affordable supply.
“Financial support is needed for young people, especially in big cities,” the circular said. The goal is to restore existing housing supply and increase the efficiency of low-cost commercial rental housing supply.
As the housing market downturn continues without signs of recovery, Beijing is pushing a three-project model that includes affordable housing, urban renewal, and emergency public facilities. This model is seen as the foundation for market recovery.
China will boost rental housing supply in major cities (Photo: AFR).
But analysts are skeptical that local governments, already burdened with debt, can sustain such large financial supports, and experts are also skeptical about whether the model can fill the void in the private real estate sector.
Although Chinese households have accumulated savings since the Covid-19 pandemic, they will not spend money when they do not expect the market to recover, said Larry Hu, chief China economist at financial services firm Macquarie Group.
“The property market downturn is the longest ever,” Hu said. “The bottoming out of the market will depend on when the government makes a decisive policy move.”
The PBOC and NAFR circulars mark a shift in strategy for the Chinese government. More than 20 years of construction activity have led to vacancies and high debt levels in the housing market, while the country’s rental housing market is lagging significantly behind developed markets.
In the circular, the two agencies also requested commercial banks to increase credit support for construction and development of rental housing, and provide loans for new construction projects and renovation of long-term rental housing.
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