In terms of how the government will reduce excess supply, a few models have been proposed. For instance, with urban village redevelopment, local governments can buy older homes from households, which may then use the proceeds in the form of coupons to buy newer, bigger properties nearby.
Alternatively, the central government can establish a national acquisition platform to purchase unfinished projects from developers.
Whatever the model Beijing eventually adopts, I doubt much aid will go to privately held builders. China’s real estate sector has fundamentally changed, in that existing home sales will be the norm, as is the case with developed countries.
The industry no longer needs hundreds of developers. Most will have to liquidate and exit, and the few survivors are likely mostly SOEs, because they have better access to refinancing and thus more room to sail through the storm.
No doubt, state funding coming in to buy unwanted homes will be good news. Home prices can stabilise, which will please China’s middle class. SOE builders will breathe more easily.
But make no doubt: Xi is not bailing out privately held developers, whose cash will likely run out before a sustained housing rebound. Most won’t survive.
