How the state is propping up China’s housing market | Financial Times | 2/25/2025

Source: https://ig.ft.com/china-property-crisis/

China’s once-booming real estate sector is facing a prolonged crisis, with major developers like Evergrande, Country Garden, and Vanke struggling under financial distress. The downturn began in 2021 when Evergrande defaulted, triggering a wave of instability across the industry. Regulatory measures like the "three red lines" policy, aimed at controlling excessive borrowing, further tightened liquidity and deepened the crisis.

To stabilize the sector, the Chinese government launched a 300 billion yuan ($41.4 billion) relending program for affordable housing. However, implementation has been slow, with only a small portion of the funds utilized. Some experts are calling for more aggressive measures, such as direct state purchases of unsold homes, to address the massive oversupply and restore confidence in the market.

Meanwhile, consumer behavior is shifting, with homebuyers favoring second-hand properties over new developments due to uncertainty over project completions. This shift signals deeper concerns about trust in developers and long-term market stability.

Despite government interventions, the road to recovery remains uncertain. High developer debt, an oversupply of vacant homes, and demographic changes pose significant challenges. Analysts suggest that meaningful economic and policy reforms, including potential changes to urbanization policies, may be needed to ensure a sustainable recovery in China’s housing market.