China challenge: getting poor migrant workers to buy vacant homes

Sun Jan 3, 2016 8:23pm EST
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By Xiaoyi Shao and Umesh Desai

BEIJING/HONG KONG (Reuters) - Rattled by the potential economic fallout from millions of unsold homes, China wants migrant workers to buy properties in smaller cities and ease the burden on a real estate sector that makes up about 15 percent of the country's economic growth.

The move underscores Beijing's concerns over a stock of some 1 billion square meters of vacant housing - around 13 million homes or enough to house the population of Australia - and the broader knock-on effect of any defaults by struggling property developers as the world's second-largest economy grows at its slowest pace in a quarter of a century.

While encouraging migrants to buy homes in lower-tier cities seems like a remedy to boost demand, making money available to them will prove tougher. Many of China's more than 270 million migrants earn below 3,000 yuan ($462) a month, less than half the cost per square meter needed for a home in a lower-tier city such as Changzhou, in eastern Jiangsu province.

With low incomes and few assets, migrant laborers are not obviously attractive loan candidates, and the authorities will need to find property developers willing to sell homes at a discount and local governments ready to subsidize purchases.

"Conditions are not mature for migrant workers to buy unsold homes. You can't count on a certificate for housing ownership to resolve everything," said Jason Hu, head of research at Chinese property consultant Holdways in Beijing.

"Everyone wants to settle in the city, but where's the money?" said Hu, adding other issues need to be resolved such as giving migrant workers equal access to social security and public services.

DISTANT DREAM   Continued...

New apartment buildings are seen under construction in Nanjing, Jiangsu province, December 18, 2015. REUTERS/China Daily