East China City Shows How to Deal With Glut of Unsold Homes

By Ding Feng and Qing Na

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The eastern Chinese city of Jinan managed to reduce its supply of unsold properties in core areas last year with help from a central bank pilot program providing cheap loans to companies that buy properties to convert into rentals.

In 2023, the estimated amount of time it would take for the city’s unsold new properties in major urban areas to be sold fell to 24 months, down from 25.3 months the previous year, according to local authorities.

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Jinan reduced its supply of unsold properties with the help of a central bank program offering cheap loans to convert properties into rentals.
The city's estimated time to sell unsold new properties in core areas fell to 24 months in 2023 from 25.3 months in 2022.
The program, supported by 100 billion yuan from the People’s Bank of China, enabled SOEs to acquire and rent out properties, improving rental housing supply and achieving returns between 3.5% to 5%.

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Who’s Who

Jinan Urban Development Group Co. Ltd.: Jinan Urban Development Group Co. Ltd. is a local state-owned enterprise in Jinan, China. It benefits from a central bank pilot program providing cheap loans with interest rates capped at 3%. The company primarily rents out most acquired homes at market rates, focusing on properties in prime locations. Its strategy includes buying unsold apartments in bulk at discounts, especially smaller apartments that yield annual returns between 3.5% and 5%.

Jinan City Investment Group Co. Ltd.: Jinan City Investment Group Co. Ltd. is a state-owned enterprise in Jinan that focuses on providing government-subsidized rental housing at below-market rates to low- and middle-income families. Under the PBOC’s loan program, it acquired 11 projects primarily targeting properties suitable for rentals. The company aims for a minimum rate of return of 4% on its projects, with three developments already achieving this benchmark.

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What Happened When

2022：: According to a report, institutional home providers accounted for about 5% of China's rental housing market.

Last year (2023)：: Jinan managed to reduce its supply of unsold properties in core areas with help from a central bank pilot program providing cheap loans to companies that buy properties to convert into rentals.

Last year (2023)：: The People's Bank of China introduced a pilot loan program and set aside 100 billion yuan ($13.7 billion) to support local authorities or SOEs in buying homes in bulk to increase the supply of rental housing.

By the end of March 2024：: Banks had given out more than 12 billion yuan of loans to fund the acquisitions of over 100 residential developments in eight pilot cities.

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