China Real Estate: Government measure to stabilize the sector and finance millions of unfinished apartments

China Real Estate: Government measure to stabilize the sector and finance millions of unfinished apartments

According to a report by finanzmarktwelt.de, the government in China plans to create a list of 50 real estate developers that are eligible for further financing opportunities. The measure aims to give financial institutions more confidence in lending to the struggling sector. It is estimated that $446 billion is needed to stabilize the industry and complete millions of unfinished homes.

China: Not the first whitelist

The planned whitelist would be the most far-reaching measure to date to stabilize the real estate sector. Similar measures have been taken in the past, such as providing new credit lines for developers worth preserving. Nevertheless, some of the companies supported at the time later ran into serious financial difficulties. The central problem is falling property prices, which have not fallen this much since 2015.

20 million unfinished homes in China

A particularly acute problem is the large number of apartments that have already been paid for but not yet completed. An estimated 20 million units have been sold but are not yet ready for occupancy. Nomura Holdings estimates that around 404 billion euros would be needed to complete these units. In China, complexes are often only built once the individual units have been sold, resulting in a significant surplus of unfinished apartments.

The Chinese government's planned measures may temporarily stabilize the real estate sector, but the problem of excess unfinished units remains. In the long term, further measures may be necessary to regulate the overproduction of real estate in China and to sustainably stabilize the industry.