BEIJING — On Friday, Chinese authorities pledged new support for state-owned enterprises (SOEs) to enable them to purchase unsold apartments, aiming to assist developers in securing funding to complete pre-sold property construction. These measures represent Beijing’s latest efforts to address the challenges within its massive real estate sector.

“I think it is encouraging that the policy is taking a turn of direction trying to support the housing market,” said Zhu Ning, a professor of finance at Tsinghua University and author of the book "China’s Guaranteed Bubble."

At a briefing, People’s Bank of China Deputy Governor Tao Ling announced that the central bank would provide 300 billion yuan ($42.25 billion) to financial institutions. These institutions will then lend the funds to local SOEs, allowing them to buy already built but unsold apartments. The central bank anticipates that this support will generate 500 billion yuan in financing for such purchases, potentially converting these apartments into affordable housing.

Real estate companies can use the proceeds from these sales to complete construction on other apartments. Regarding unfinished, pre-sold properties, National Financial Regulatory Administration Deputy Director Xiao Yuanqi reported that commercial banks have issued 935 billion yuan in loans to finish construction on whitelisted projects since the program began in January.

“The government’s purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery,” Larry Hu, chief China economist at Macquarie, told CNBC. “Finally the government stepped in as the buyer of the last resort.”

Hu added that while SOEs and local governments are currently implementing these policies, their resources may be insufficient to make a significant impact at the macro level, suggesting that more central government intervention might be necessary in the future.

Earlier on Friday, Vice Premier He Lifeng emphasized the importance of completing and delivering pre-sold homes during a national videoconference, according to state media. Officials stated that housing projects not meeting the whitelist requirements must address their issues independently.

Developers “that must go bankrupt should go bankrupt, while those that need to be restructured should be restructured,” said Dong Jianguo, deputy head of the Ministry of Housing and Urban-Rural Development. He stressed that homebuyers’ interests and rights should be prioritized, and legal violations should be punished.

Resolving China’s real estate issues will take time. Zhu highlighted that local governments' limited fiscal resources constrain their purchasing capacity. He also warned of potential rent-seeking and moral hazards in determining which properties to purchase.

“Unless potential home buyers sense some serious change of housing prices going up, the current housing price is still too expensive for household income or rent yield,” Zhu said. “However, I am not sure whether the government is willing to go as far as to engineer another big run-up in housing prices.”

The People’s Bank of China also removed a floor on mortgage interest rates and lowered the minimum down payment ratio for first- and second-time home buyers on Friday.

For years, many apartments in China were sold before construction was completed. However, delays in the delivery of completed apartments have increased as developers face financial difficulties. Nomura estimated last year that there were around 20 million such pre-sold, unfinished apartments in China.

At the current sales pace, it will take more than two years to clear the existing stock of new homes, according to a Caixin report citing a local research firm in March. This duration is nearly twice the historical pace of 12 to 14 months.

The official 70-city house price index released on Friday indicated a faster decline in April than in March. Goldman Sachs analysis showed an 8.5% month-over-month decline in April, compared to a 5.6% decline in March.

“Despite more local housing easing measures in recent months, we believe the property markets in lower-tier cities still face strong headwinds from weaker growth fundamentals than top-tier cities, including the more severe oversupply problems,” the Goldman Sachs report stated.

In summary, while the Chinese government’s latest measures aim to stabilize the housing market and provide liquidity to developers, the path to resolving deep-seated issues in the real estate sector remains complex. The success of these interventions will depend on the implementation capabilities of local governments and SOEs, as well as broader economic conditions. The focus on supporting SOEs in purchasing unsold apartments represents a strategic move, but long-term solutions will require sustained efforts and potentially more significant central government involvement.