China unveils new property support measures amid concerns about Evergrande fallout

HONG KONG/BEIJING - A state-backed property project in China has received the first development loan under Beijing's so-called "whitelist" mechanism and two major cities have eased home-buying curbs, state media reported, as concerns mount about the liquidation of Evergrande.

The latest measures add to a string of supportive policies rolled out by the world's second-largest economy over the past year to help revive the economically crucial property sector hit by an unprecedented debt crisis.

Despite those measures, the property market ended last year with the worst declines in new home prices in nearly nine years, casting a shadow over the hopes of broader economic recovery and renewing investor demands for stronger policy initiatives.

Analysts say a Hong Kong court placing property giant China Evergrande Group into liquidation could worsen the demand outlook as homebuyers take a cautious approach given uncertainty about the health of other private developers.

Two of China's major cities, Suzhou and Shanghai, followed Guangzhou in easing home-buying restrictions, official media reported on Tuesday, in an effort to boost demand from homebuyers.

Investors were not excited by the new supports, however, with Hong Kong's Hang Seng Mainland Properties Index and China's CSI 300 Real Estate Index both falling 2.6 per cent on Wednesday (Jan 31).

In another support measure, a loan worth 330 million yuan (S$61.9 million) to a state-backed development was approved just a few working days after the government announced the "project whitelist" mechanism, the official Securities Times reported on Wednesday.

Securities Times said Nanning city in Guangxi region had provided its first "project whitelist" to local financial firms containing 107 developments. A project by state-backed Guangxi Beitou Industry & City Investment Group was granted a development loan from China Mingsheng Banking Corp.

The southwestern city of Chongqing had also come up with a whitelist of 314 projects, with a total of 83 billion yuan in financing required, the report added.

The rollout of funding support under this mechanism is being closely watched by a market reeling from a debt crisis since mid-2021 which resulted in unfinished homes and defaults, especially among privately owned developers.

Homebuyer sentiment

The new measures come as analysts weigh the impact of the court's order to put Evergrande, once China's top-selling developer into liquidation with more than US$300 billion (S$401 billion) in liabilities.

"We think that home-buyer concerns about purchasing pre-sold units from financially troubled developers that might not deliver the project in a timely fashion - that is a major reason that home sales are still sluggish," said Christopher Beddor, deputy China research director at Gavekal Economics.

"If nothing else, the headlines of the ordered liquidation in Hong Kong, that's not going to have a great impact on homebuyer sentiment."

The unfinished homes promised to buyers by Evergrande are, however, likely to be delivered because the government was making this a top priority for all developers, said Jonathan Krane at Krane Shares in New York.

"The long-term impact is that real estate will account for a smaller portion of China's economy, to be replaced by other industries such as technology and consumer products and services."

Besides the impact on home sales, S&P Global Ratings said in a report published on Wednesday Evergrande's offshore creditors stand to receive a potentially tiny payout in a complicated liquidation process that could take years to play out.

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