China's Cabinet Approves Affordable Housing Plan to Address Property Crisis and Boost Market

China's cabinet, led by Premier Li Qiang, has given the green light for the planning and construction of affordable housing in the country. This move comes as the Chinese property sector faces a deepening crisis, with some developers at risk of default due to difficulty selling apartments and raising funds. While details of the new cabinet guidelines were not provided, Xinhua news agency reported that they aim to expand investment and promote the healthy development of the property market. Additionally, China's central bank has issued guidance on relaxing residential housing loan rules to boost loan applications and house purchases.

Under the new guidelines, banks are instructed to treat those without a house in their names at the location of a purchase as first-time home buyers, regardless of whether they have previously used a loan for a home purchase. The central bank emphasized that houses are meant for living in and not for speculation. The increased focus on affordable housing comes as Beijing attempts to address the issue of skyrocketing home prices in major cities, which have made it difficult for many young buyers to enter the market. This plan has become even more important in light of the property sector's debt crisis and weakening economic growth.

In fact, the Ministry of Housing and Urban-Rural Development stated last year that China aims to add 6.5 million new low-cost rental housing units in 40 major cities between 2021 and 2025. However, the property downturn has created an urgent need for more robust policy support. In July, new home prices fell for the first time this year, further highlighting the need for intervention. In response, the housing ministry, central bank, and national financial regulator jointly issued a notice to ease mortgage policies and revive the sector. This comes as the housing market has been grappling with a severe debt crisis over the past two years, initially triggered by government efforts to control rising debt levels.

In addition to the affordable housing plans, the cabinet also approved initiatives to develop the pharmaceutical and medical equipment industries from 2023 to 2025. The government aims to expand the country's supply capacity of high-end medicines and key technologies. With these measures in place, China is taking decisive steps to tackle the challenges within its property sector and promote more equitable access to housing. By prioritizing affordable housing and addressing loan policies, the government aims to stabilize the market and ensure sustainable growth in the sector.