China's Shandong to Buy Unsold Homes Amid Property Downturn

  • Shandong government to convert unsold office space to schools
  • Real estate is `the pillar industry of our national economy'

China’s government this year has bought up stocks to stem an equities rout, orchestrated a debt swap for local government to switch loans into bonds, and spent reserves to support the yuan. Now, a provincial government is stepping in to the property market to snap up unsold homes.

An eastern coastal province will buy small and medium-sized residential properties and convert them into public rental homes, according to a Shandong government statement dated Sept. 1 and posted to its website on Monday. The government will also purchase or lease commercial buildings that can’t be sold for a long time and convert them into kindergartens and schools.

The move highlights efforts to prop up the property market, which with related sectors accounts for about a quarter of the nation’s economy.

"The real estate sector is the pillar industry of our national economy," Shandong’s government said in the statement. The province has accumulated 160 million square meters of unsold properties, which would take 27.3 months to sell at the current pace, according to the statement.

"The government will not directly invest in building public rental housing any more in principle, " the government said.

Other policies to help destocking in the province include increasing the amount of loans public housing funds can offer, and encouraging rural teachers and doctors to buy homes at a discount.

Shandong’s plan is an attempt to deal with stagnating sales and continued price drops in third and fourth-tier cities nationwide even as prices and sales in bigger metropolises recover.

The central government opened the door for such policies when it said local authorities can convert some inventories to public rental homes and subsidize tenants, according to a statement from the Ministry of Housing and Urban-Rural Development in January.