New | China’s new mantra - eliminating the housing glut

Location, location, location. It is the mantra everyone knows in property investment.

Destocking, destocking, destocking. The top leaders in China have repeated it more than three times in the past month.

The message has got across: Selling down property inventories is one of the top priorities for policymakers next year.

And UBS chief China economist Wang Tao explains why: “Only once property volume construction activity stops sliding and more progress has been made in closing down excess capacity and non-viable enterprises will China’s economy be able to stabilise on a more sustainable basis.”

But the government is yet to fully map out how it is going to help developers sell down a record pile of 697 million square metres of unsold properties as of the end of November. That amount is more than the country’s full-year property sales back in 2006, when the economy grew 12.7 per cent. Now the world’s second-largest economy is struggling to hit annual growth of 7 per cent.

“We must destock property inventories, by turning migrant workers into urban citizens in a faster pace and pressing ahead housing reform to meet demand from these new urban residents,” the ruling Communist Party’s Politiburo meeting chaired by President Xi Jinping concluded last week.

There are also proposals from leading government think tanks that China should give tax credits to mortgage borrowers so as to improve housing affordability and stimulate demand, although implementation will not be imminent as it is part of the country’s long-awaited personal income tax reform.