By Jiahui Huang


Shares of Chinese property developers surged on rising expectations that government entities in China are moving to help buy up excess housing in a bid to revive the struggling real-estate sector.

The Hang Seng Mainland Properties Index, which tracks Chinese property developers listed in Hong Kong, was up 5.6% in afternoon trading Thursday. Sino-Ocean and CIFI rose 46% and 29%, respectively, while Longfor, China Vanke, Agile and Sunac China were each more than 10% higher.

Gains were fueled in part by news Wednesday that officials in Hangzhou, a large city near Shanghai, said they would begin buying private residential units in a district with a surplus of homes, using them for public housing. Similar plans announced Thursday in the far western city of Dali also helped.

Those moves come days after the city of Nanjing said it would assist in renovating or purchasing homes to create public housing, while Foshan, a mid-sized city near Hong Kong and Macau, said it would encourage state-owned enterprises to participate in a housing trade-in program.

Analysts said that altogether the plans, while limited to a handful of cities, are significant. They come weeks after top officials in Beijing signaled a major shift in policy to focus on absorbing excess housing supply in China and creating more public housing.

Analysts at the time said Beijing appeared to be setting the stage for rescue efforts that could range from unprecedented easing of home-buying restrictions to billions in state spending to buy up existing housing inventory. If the government can acquire a meaningful volume of unsold homes from developers, especially privately owned ones, that would resolve the issue of excess inventory and channel funds to cash-strapped developers, they said.

Morningstar analyst Jeff Zhang said Hangzhou may be wanting to pilot test the trade-in scheme in a district with a more imminent need for inventory clearance. With Dali following suit, "we expect more cities to ramp up government purchases of existing homes, particularly lower-tier ones that saw more significant home sales decline," he said.

"Policy has clearly turned more encouraging," Nomura analysts Jizhou Dong and Riley Jin said in a note, pointing in particular to a relaxation in homebuying restrictions in top-tier cities in recent weeks. They added that they believe local governments now have limited further room to support the property sector, and that "it now comes to the central government to introduce meaningful measures," such as the acquisition of unsold homes.

China's property sector has been in a years-long slump. A slowing economy and weak consumer sentiment have dragged sales of many property developers into sharp decline, pushing them into a liquidity crisis. Unable to tap debt markets, many developers have defaulted on loans and bond payments, with some going bankrupt.

Beijing has previously tried to revive the real-estate sector by providing citizens with cheaper home loans and by relaxing home-buying restrictions. However, these efforts have fallen short, prompting authorities to mention in last month's Politburo meeting the shift to focusing on absorbing excess apartment supply as a way to resolve the property crisis.


Write to Jiahui Huang at jiahui.huang@wsj.com


(END) Dow Jones Newswires

05-16-24 0218ET