Housing subsidies may be on the way in smaller cities

Potential homebuyers visit a housing expo in Zhengzhou, Henan province.[Provided to China Daily]

China may step up efforts to slash its mounting housing inventory, with farmers and migrant workers being the biggest beneficiaries.

Citing anonymous sources, Economic Information Daily reported that the Ministry of Housing and Urban-Rural Development is formulating a plan to support farmers and migrant workers in the purchase of homes in China's third- and fourth-tier cities, which have been plagued by a rising stockpile of unsold homes.

The newspaper is affiliated with Xinhua News Agency.

The plan includes measures such as financial and mortgage interest subsidies, and tax breaks, according to the newspaper. The ministry is also considering including migrant workers in the housing provident fund, a low-mortgage rate provision program that was until recently designated for urban employees.

The report echoed a previous Bloomberg report that China plans to encourage small and mid-sized cities to offer rural residents subsidies and tax cuts to buy their first homes in urban areas.

Another report by China Business Journal cited officials at the Housing Ministry who said local governments next year will purchase unsold homes from private developers and resell them at a discount to dislocated people at an unprecedented level. The move could help lower developers' inventory while reducing the need for governments to build new houses－for example, to accommodate those displaced by shantytown renovation projects－or build low-rent homes.

China's real estate investment growth slid further to 1.3 percent in the first 11 months, the lowest in the country's history, according to the National Bureau of Statistics.

"We'll not be surprised if the government adds supportive monetary policies and fine tunes regulatory measures, even a cut in the down-payment ratio," said Franco Leung, a senior analyst at Moody's Investors Service. "However, we expect 0 to 5 percent growth in the value of nationwide property sales in 2016, down from 10 percent plus this year."

"This is because the stimulus effect has already shown in this year's sales, and the marginal effect of further stimulus will diminish. In third- and fourth-tier cities, home ownership is already high," he said.