2015-01-25

Chinese Governments Get Serious About Bailouts and Growth

Over the weekend, two Chinese cities rolled out major policies to spur the economy and bailout the housing market.

The most important news comes from Fujian province. In Fuzhou, the city government is implementing one of the Ministry of Housing ideas for absorbing housing inventory, offering to buy empty houses from city residents. Homes between 45 and 135 sqm can be sold to the government at a discount of at least 15% from the market price.

The full impact of this policy is hard to predict. This is good news for lenders, since housing speculators can repay their loans, but the effect on the housing market is less clear. Once the government has the homes they will face pressure to generate cash flow. Renting them out will put downward pressure on rental prices and satisfy rental demand, potentially relieving some demand from home buyers. In high demand areas, the plan could bear dividends as former ghost cities are brought to life and increase overall demand. In less attractive areas (the under developed, uncompetitive fourth-tier cities), the government may achieve nothing except the concentration of risk on the municipal balance sheet.

iFeng: 福州统购市民余房 商品房价低于市场评估价15%以上

Hangzhou is offering subsidies of up to ¥1 million ($161,000) to highly skilled individuals who purchase a home, and they can also receive a ¥30,000 subsidy ($4800) on car purchases.

There are five classes of talent, from A to E. A top level A talent is a global talent. B is a national talent. C is a provincial talent. D is a municipal talent. E is for high level talent. The A class talent will be assessed individually, B class can receive the ¥1 million housing subsidy.
For example, for A class talent will take one person, one proposed solution to the housing problem; for B, C, Class D personnel there are ¥1 million, ¥800,000, ¥600,000 in housing subsidies; E class talent can receive ¥1200 / month rent subsidies.

Global entrepreneurs who launch innovative new companies can receive a ¥5 million subsidy, while a team of entrepreneurs can earn up to ¥20 million. A major groundbreaking project can receive up to a ¥100 million subsidy.

This policy is very aggressive and signals some concern about the economy, but it is a smart way to attract talent. On the plus side, Hangzhou, and Zhejiang province more broadly, is also friendly to private capital and entrepreneurship. This isn't an unfriendly, high tax, high regulation area trying to lure in businesses. It's a capitalist-friendly city looking to grow its way out of trouble.

iFeng: 杭州出台人才新政 买房政府最高补贴100万

The People's Daily days the housing market will not collapse, and will hopefully rebound in 2H 2015.
The current volatility of the property market in some people's eyes has been exaggerated as a prelude to the collapse. Experts believe that the real estate "crash," said to be worried over. On the one hand, there is still a lot of macro-economic development potential; on the other hand, the rigid requirements to support the property market will move. ICBC chairman Jiang Jianqing said the mainland Chinese real estate has always been a very strong demand, excessive inventory places may need to make adjustments, but after a period of time to adjust to reach a steady state of equilibrium, will not pose a significant risk.

"Historically, Japan and the US real estate bubble are generated in the urbanization rate has reached more than 75 percent, and economic growth is slow, but there is still room for development of urbanization in China, and the economy has maintained rapid growth, so the crash occurs unlikely. "Director of the National Development and Reform Commission reform and development of cities and small towns Tie Center said.

iFeng: 人民日报:中国楼市不会崩盘 下半年有望再回暖

Zhang Xin of SOHO China rebuts the urbanization drive. China property tycoon calls top of urbanisation drive
“By now, most of the cities in China are built,” she said on the fringes of the World Economic Forum in Davos. “Even small towns are quite built. So I think the intense urbanisation has come to an end.”

In the piece below, she sounds optimistic about the government's ability to manufacture GDP out of Chinese savings, but addressing Kaisa she says, "Instantly, the debt market is gone."


Finally, in other housing news, Beijing says affordable housing policy is history. Beijing started building affordable housing in the 1990s. The price was held at ¥4,000 per sqm and there were strict income restrictions on who could live there. After this year, all of the wait-listed families will be able to buy homes and the city will end the policy. Going forward, the city will help low income residents rent public housing.

iFeng:北京不再新建经适房 4000元经适房将成历史

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