China To Follow Singapore To End Property Slump

The troubled nation is looking at emulating Singapore’s residential market that is dominated by public housing

China plans to take a page from Singapore’s social housing model to help end a multi-year property slump that has hammered the nation’s consumer confidence and weighed on economic growth. Beijing has, in the recent weeks, named two big projects as the centre of its housing policy: building social housing and renovating run-down inner-city districts. The projects have top-level political backing and could soon have one trillion yuan (S$191 billion) or more of central government support.

Authorities are considering offering cheap central bank loans to key state-owned policy banks to fund the projects. The sum under discussion – which could be increased through further leverage and other funding – amounts to the equivalent of about 10% of annual new home sales.

Singapore, while a hub of private-sector business and financial activity, is renowned for a residential market that is dominated by public housing. If China’s new plan works, officials might be able to both end a nearly three-year slump in property construction and meet President Xi Jinping’s aims to promote “common prosperity”.

Details of the social housing push are yet to be made fully public. China’s State Council handed instructions out last month in a classified document. That called for a new model for the real estate sector, with 35 cities expected to test the programme, according to a news report.

Analysts say the idea is to create a tightly regulated social housing market with limits on who can buy the homes and how they can be sold on to new owners. One way to ensure that would be to require them to be sold back to the government. Alongside such a public housing market would be a freer commercial segment catering to wealthier households. That might even allow a return to speculation on property values – something Beijing has tried to clamp down on for years.