China has teased how it might fix its property crisis. Markets are loving it

Chinese stocks experienced a significant boost on Thursday following an announcement by officials in a major city regarding their plans to purchase unsold homes. This move is seen by some analysts as a potential trial run for a larger-scale solution to China’s ongoing property crisis.
Hong Kong’s Hang Seng Index closed 1.6% higher, reaching its highest level since August. The index has gone up nearly 30% from its low in January, signaling a bull market. Property developers were the top performers, with an average increase of 3.1%.
Two Chinese homebuilders, Longfor Group and Sunshine 100 China Holdings, saw their stocks rise significantly. This was prompted by the announcement that the government in Hangzhou will buy unsold homes and convert them into affordable housing.
The Chinese government is considering a plan for local governments to buy unsold homes to address the property crisis. The National Development and Reform Commission also plans to promote affordable housing and explore new models for the real estate sector.
Citi analysts believe that the move to create a “national team” for the housing market is mostly symbolic and meant to show support for the sector.
There is speculation that China may be considering a bailout plan similar to Japan’s, where unfinished housing units would be acquired and turned into low-cost housing. This comes after a Chinese media outlet reported on the matter last month. The plan would involve selling or renting out these units.
Fund managers are more cautious about the latest proposal, despite analysts from ING Group calling it a significant support measure.
According to Jeff Zhang, an equity analyst at Morningstar, there is cautious optimism about the government’s plan to buy unsold units in more cities. However, the funding issue could still be a concern. Beijing is trying to address the ongoing property crisis, which is negatively impacting the economy and causing protests by homebuyers across the country.
In an effort to address the housing crisis, several major cities in China have recently eased home-purchase restrictions. This includes cities like Hangzhou, Xi’an, and Chengdu. The government, specifically the Politburo, has also pledged to explore additional measures to tackle the housing issue. One of these measures is implementing “city-specific” policies to reduce housing inventory.
Investors are flocking back to Chinese shares after a sell-off that caused major indexes in Hong Kong and Shanghai to plummet. The Nasdaq Golden China Index, which tracks Chinese companies on Wall Street, has risen 11% since April and reached a seven-month high on Monday.