Chinese Developers’ Shares Soar on Beijing’s Policy Support for Unsold Homes

Chinese developers saw a significant boost in their shares as optimism grew on the possibility of Beijing providing policy support for the purchase of unsold homes from struggling builders. The Bloomberg gauge of Chinese real estate stocks surged as much as 10.7%, reaching its highest level since December 2023.

One of the key drivers of this optimism was the news that China is considering a proposal to have local governments buy millions of unsold homes across the country. This potential move by Beijing is seen as one of the most ambitious attempts yet to revive the beleaguered property market. While the details of the plan are still being debated, analysts like Karl Chan from JPMorgan Chase & Co. see the potential for an exciting expansion in scale.

Over the past few months, Beijing has been implementing various measures to support the real estate sector, including lifting restrictions on home purchases in major cities. However, the issue of unsold homes due to weak demand still remains a significant challenge.

The decline in new-home prices and the drop in the value of new-home sales underscore the urgent need for action in the real estate market. Raymond Cheng, head of China property research at CGS International Securities HK, emphasized that the potential move to buy unsold homes could help address excess inventory and alleviate developers’ liquidity issues, estimating that 1.8 trillion yuan in funding would be needed for the purchase of five million units.

The positive sentiment in the market was reflected in the performance of other developers, such as Sino-Ocean Group Holdings Ltd. and CIFI Holdings Group Co., whose shares also saw significant gains. Overall, the news of potential policy support from Beijing has injected a sense of optimism into the Chinese real estate sector, with investors hoping for a much-needed recovery in the market.