The Chinese State Council is seeking advice from some regulators and local governments on requiring local state-owned enterprises to buy unsold homes from developers at discounted prices to be used as social housing, Nomura noted in a report.
In the past two weeks, except for Shanghai, almost all first-tier cities, including Shenzhen, Hangzhou, Beijing and Chengdu, have relaxed their local home purchase restrictions to some extent. However, Nomura believed that under the framework of city-specific policies, local governments have limited ability to take measures on their own to support the property sector. As such, the broker believed that it is now the turn of the Central Government to take meaningful measures to support the real estate sector, and that the potential purchase of unsold homes, which has been widely rumoured, is one of the measures initiated and/or supported by the Central Government.
While Nomura is uncertain whether the Central Government will approve and implement the above housing purchase scheme, and the scale or implementation timetable is not known, the news could be seen as evidence of more supportive measures for the real estate sector in China. It is believed that the Central Government's ability to purchase large quantities of unsold homes from developers, particularly private developers, will help to address the sector's inventory problem and would direct funds to credit-constrained private homebuilders to support their construction activities.
Nomura expected that share prices of Chinese real estate developers and companies on the related value chain should maintain their momentum in the near term. The broker also forecasted the domestic property sector to rebound on more positive news, and preferred CHINA RES LAND (01109.HK) +1.100 (+3.571%) Short selling $120.57M; Ratio 8.577% , LONGFOR GROUP (00960.HK) +1.360 (+10.932%) Short selling $208.52M; Ratio 23.727% and KE Holdings (BEKE.US) .
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