China property defaults won’t stop banks lending to cash-strapped developers, says Goldman Sachs report

“This highlights policymakers’ focus on addressing the ‘flow’ credit issues, directing much of the credit easing towards financing for the completions of pre-sold but uncompleted homes,” wrote Kenneth Ho, a managing director at Goldman.

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Boom, bust and borrow: Has China’s housing market tanked?

Boom, bust and borrow: Has China’s housing market tanked?

China’s larger banks have contributed to close to three quarters of new property loans, and bank lending to the developers is expected to grow 3.9 per cent year on year in 2024, the report added.

“We do not believe that improving credit supply to the property developers in and of itself will be sufficient to revive the sector … At some point, policymakers will need to address the problem of excess inventory in the real estate market, or managing the ‘stock’ problem.

Beijing has been calling on local governments and banks to relieve an industry-wide liquidity crunch and boost homebuyer sentiment in recent months, after new home prices in December recorded their sharpest decline in close to nine years according to official data.

The housing ministry launched a “project whitelist” mechanism last month, asking provincial governments to recommend to banks property projects that are deemed financially sound and could qualify for further loan support.

The whitelists, which shifted screening criteria away from the developers to focus on the financial health of individual projects, have so far led to over 17.9 billion yuan worth of bank loans being channelled towards over 83 residential property projects across the country, as reported by local media.