Chinese Property Developers Rally on Reports of Government Plan to Buy Unsold Homes

Chinese property developers saw a surge in their shares on Thursday following reports that China is considering a plan for local governments to purchase millions of unsold homes from distressed companies in a bid to tackle the ongoing property crisis.

The Hang Seng Mainland Properties Index in Hong Kong closed up 4.9%, reaching its highest level since November 24. The sub-index has gained approximately 30% since mid-April, when speculations started circulating about more supportive measures to stabilize the struggling sector.

Notably, defaulted private developer Fantasia and KWG Group saw their stocks jump 63% and 40% respectively, while state-backed Sino-Ocean Group surged 46%.

The CSI 300 Real Estate index in China also saw a 3.5% increase on Thursday, building on a 2.2% rise from the previous day.

Reports from Bloomberg News suggested that the State Council is gathering feedback on the plan to have local state-owned enterprises purchase unsold homes from distressed developers at discounted rates. These homes would then be converted into affordable housing, providing a boost to the housing market.

While some skeptics have raised concerns about the lack of housing demand in smaller cities and the additional strain this plan may put on already indebted local governments, analysts remain cautiously optimistic about the potential positive impact of the proposed measures.

JPMorgan referred to the plan as a potential game-changer that could stabilize property sales, while Nomura highlighted the benefits of resolving the inventory issue and providing much-needed support to private companies.

Despite the potential challenges ahead, market analysts believe that the reported plan has the potential to alleviate the downward spiral in the property sector and could lead to a more stable market environment in the future.