China property crisis: Government takes action to tackle slump

The Chinese government has unveiled its most significant steps yet to address the crisis that has been dragging on the country’s property sector in recent years.

The new measures include cutting the amount home buyers need for a deposit and allowing local authorities to purchase unsold properties.

The announcements came on the same day as official figures showed the steepest drop in home prices in almost a decade, in a sign the crisis is deepening.

Problems in China’s property market are having a major impact on the world’s second largest economy as the industry had been a key driver of growth until recently.

The country’s central bank effectively scrapped the minimum mortgage interest rate and cut the minimum down payment for first-home buyers from 20% to 15%. The minimum deposit for a second home was lowered to 25% from 30%.

At the same time, state-run Xinhua News Agency reported Vice Premier He Lifeng as telling officials that local governments can buy properties at “reasonable prices” and sell them as affordable housing.

Mr He did not offer details about the number of properties that may be purchased or over what timescale.

Figures released earlier on Friday showed new home prices had fallen for a tenth month in a row in April. The 0.6% month-on-month decline was the sharpest drop since November 2014.

Also on Friday, struggling Chinese developer Country Garden had a hearing over its potential liquidation adjourned to 11 June.

China’s property developers have been facing a major financial squeeze since 2021, when authorities introduced measures to curb the amount big real estate companies could borrow.

Since then several large property developers have defaulted on their debts.

In January, Evergrande – which is the world’s most indebted property developer – was ordered to be liquidated by a Hong Kong court.