Risks in China's housing market remain overall controllable despite individual problems that have arisen, Vice Premier Liu He said, in the latest reassurance from senior Chinese officials about the stability of the country's property sector amid the Evergrande debt crisis. Yi Gang, Governor of the People's Bank of China (PBC), said that the major risks related to developer Evergrande are defaults on debts as they fall due, the shutdown of some of its construction sites, and uncertainty facing the on-time delivery of pre-sold homes, adding that the Evergrande risk is specific. Speaking at the Group of 30 International Banking Seminar, Yi said measures will be taken to avoid that the Evergrande risk spreads to other property firms and keep the risk from disturbing financial markets. Evergrande owes about USD300 billion, with one-third to the financial sector. This, adding to the diverse creditors and collateral Evergrande has offered for its debts, suggests that the spillover of the Evergrande incident on the financial sector is under control, according to the PBOC Governor.
Yi Gang stressed that the legitimate rights and interests of creditors and property owners, particularly home buyers, will be fully respected and protected strictly in line with the legally prescribed order of repayment. Yi voiced confidence about containing the risks. The official reiteration that risks from the indebted developer are controllable indicates “the most stressful time of the Evergrande crisis has passed,” Yan Yuejin, Research Director at Shanghai-based E-house China R&D Institute, told the Global Times. “There's little chance of a massive property easing, and a large-scale bailout is merely an unlikely illusion,” Yan said.
Speaking at the Financial Street Forum, Pan Gongsheng, Deputy Governor of the PBOC, said that excessive risk aversion among financial intuitions and the financial market was being corrected, with fundraising activities and prices in the financial market gradually returning to normal. Prices for new and second hand homes across 70 major Chinese cities either stayed flat or fell in September on a month-on-month basis. On a yearly basis, growth in home prices in these cities, both new and second hand, continued to moderate, the Global Times reports.
Meanwhile, the Standing Committee of the NPC has authorized the government to launch a pilot property tax in five regions for a period of five years. The property tax will be levied on residential and non-residential properties, and state-owned land earmarked for construction, but excluding legally owned rural houses. Zhejiang province, tech hub Shenzhen in Guangdong province and Hainan are expected to join the pilot program. Many local governments are reluctant to implement such a tax as it may cause property values to drop and dampen market demand for land – a crucial source of local government revenues. In 2020, the total market value of China's housing was around at USD62.6 trillion, nearly double of that of the U.S. and six times that of Japan. Experts believed the property tax may finally stop house prices from rising further.
