China is thinking about new property support measures to stimulate disappointing economic growth.
Regulators are mulling reducing the down payment in some neighborhoods of major cities, lowering agent commissions on transactions, and relaxing restrictions for residential purchases under the guidance of the State Council.
The government may also refine some policies laid out in the sweeping 16-point rescue package it rolled out last year, although the plans have yet to be finalised.
Signs of renewed weakness are emerging in the residential market, with a rebound in home sales slowing in May to just 6.7% from more than 29% in the previous two months.
Source: Bloomberg
Despite a broad range of policies introduced last year to support the sector, a mountain of developer debt — equal to about 12% of China’s GDP — is at risk of default and poses a threat to financial stability, according to Bloomberg Economics.
A number of developers are struggling to get creditor support for their restructuring plans after China’s real estate sector defaulted on more than 100 US dollar bonds.
Two of the country’s most high-profile developers, Dalian Wanda Group Co. and China Evergrande Group, are showing escalated signs of distress. Wanda is on an asset-selling spree to generate more liquidity while seeking a loan relief plan that may allow it to extend principal repayments for some borrowings from Chinese banks, while Evergrande faces more than a thousand lawsuits.
Australian commodity exporters will be watching developments with interest.
Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770. The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.
