China’s real estate crisis isn’t over yet, IMF says

BEIJING — China needs to do more in order to fix its real estate problems, the International Monetary Fund said Friday.

The property market contributes to about a quarter of China’s GDP and has been a drag on growth, especially since Beijing cracked down on developers’ high reliance on debt in 2020.

Chinese authorities started to ease restrictions on financing for the sector over the last several months.

“Authorities’ recent policy measures are welcome, but in our view additional action will be needed in order to end the real estate crisis,” Thomas Helbling, deputy director in the IMF’s Asia Pacific Department, said in a briefing.

“If you look at the measures, a lot of them address financing issues for the developers that are still in relatively good financial health, so that will help,” he added in an interview with CNBC. “But the problems of the property developers’ facing severe financial difficulties are not yet addressed. The issue of the large stock of unfinished housing more broadly is not yet addressed.”

Apartments in China are typically sold to homebuyers before completion. Covid and financial difficulties slowed construction so much that some homebuyers halted their mortgage payments last summer in protest.

Chinese authorities subsequently emphasized the need to help developers finish building those pre-sold apartments. Still, residential floor space sold in China dropped by nearly 27% last year, while real estate investment fell by 10%, according to official numbers.

“I think it would be helpful to point to a way out and … how the restructuring could be done and who will absorb losses if there are any losses,” Helbling said. He also called for additional measures to address the large stock of unfinished apartments.

“Otherwise the sector…