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Slowdown spurs China to back housing again

BEIJING — With China headed for its slowest full-year expansion in a generation, the government has now listed housing as one of six sectors to be supported after years of trying to cool the real-estate industry.

BEIJING — With China headed for its slowest full-year expansion in a generation, the government has now listed housing as one of six sectors to be supported after years of trying to cool the real-estate industry.

China will stabilise property-related consumption and make it easier for people to access mandatory housing savings, the State Council said in a statement late on Wednesday after Premier Li Keqiang presided at a regular meeting.

The previous time China’s State Council documents mentioned stabilising housing consumption was in April 2009, when the government was rolling out a massive 4 trillion yuan (S$836 billion) stimulus plan it had announced in late 2008 to shield the economy from a global slowdown.

Gross domestic product expanded 7.3 per cent in the third quarter this year from the corresponding period a year earlier, the weakest pace in more than five years.

Growth is forecast at 7 per cent next year, based on a median estimate of 51 analysts in a Bloomberg News survey, as Chinese leaders have signalled they will tolerate weaker expansion amid economic rebalancing.

This would see Asia’s largest economy heading for the slowest annual growth since 1990, which will weigh on China’s trading partners across the region.

“(Wednesday’s) announcement marks a U-turn in stance towards the property sector after years of attempts to cool it down,” Mr Dariusz Kowalczyk, Credit Agricole CIB strategist in Hong Kong, wrote in a note to clients yesterday.

It is the first time in recent years that the central government has officially declared direct support for the housing market, said Credit Suisse Group.

New-home prices fell in 69 of 70 cities monitored by the government last month from August.

Property prices may decline as much as 10 per cent this year and the slump may extend into next year, said SouFun Holdings, China’s largest real-estate website.

MAJOR DRAG

“The slowdown in the property sector has been a major drag on growth,” Mr Ting Lu, Bank of America head of Greater China economics in Hong Kong, wrote in a note to clients yesterday.

The real estate sector, as well as related sectors including machinery, chemicals and metals used in construction, accounts for about a quarter of the Chinese economy.

The government, which started tightening lending to property developers and buyers in April 2010 to prevent asset bubbles from expanding, has also signalled plans to reverse course on home financing, with the central bank on Sept 30 relaxing mortgage rules for home buyers who have paid off existing loans.

“The government’s stance on the property market has changed to encouragement from caution,” said Mr Johnson Hu, a Hong Kong-based property analyst at CIMB Securities Research. “It realises the importance of real-estate consumption. Most cities no longer need curbs on housing-price increases.”

Consumption is an important engine of economic growth, the State Council said, adding that the government would also support e-commerce, environmentally-friendly products, tourism, education as well as old-age related products and services. It did not provide details. AGENCIES

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