China just unveiled the strongest remedies yet for its troubled housing market

Apartments under construction in Wuhan, China.

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• The Chinese government unveiled a raft of measures to stimulate its embattled housing market.
• It will remove the floor on mortgage rates, offer cheaper housing loans, and lower down payments.
• Overbuilding has led to supply far outpacing demand, leaving developers short of cash and deep in debt.

Chinese authorities just announced their biggest effort yet to shore up the troubled housing market.

In a slew of statements on Friday, the People's Bank of China said it would remove the nationwide floor on mortgage rates for first-time and second-time homebuyers, lower interest rates on housing loans, and reduce minimum down payments in a bid to boost demand.

The central bank will also set up a 300 billion yuan ($42 billion) relending program for public housing, which it expects to fuel an extra 500 billion yuan of bank lending, Bloomberg reported, citing official comments at a briefing.

Moreover, the Chinese government will push local officials to purchase empty homes from developers and turn them into affordable housing, the state-run Xinhua news agency reported, citing comments from Vice Premier He Lifeng.

He said the new policies were in the public interest and supported economic development. The moves follow the release of official data for April showing the biggest month-on-month decline in home prices in a decade.

Overbuilding is a huge problem in China's property sector. Excess inventory has reached gargantuan levels with a former top official estimating last year that there are enough spare homes to house 3 billion people — more than double the nation's population.

China's housing woes have weighed on its economic growth and sown discontent. Millions of people are facing unemployment or pay cuts as construction work dries up and cash-strapped developers default on loans.

The country's second-biggest developer, Evergrande, fanned fears of global contagion when it defaulted on its bonds at the end of 2021. The biggest developer, Country Garden, came close to defaulting last fall.

The new measures lifted shares of Chinese developers and the Shanghai Stock Exchange Property Index on Friday.

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