Beijing likely to take further steps to boost home market
Beijing's moves to bolster the property market by cutting interest rates and increasing tax sweeteners for buyers may not be enough to lift the sector out of the doldrums.
Analysts say more measures are expected to be introduced as officials attempt to prevent a further slide in property prices.
The People's Bank of China announced the third rate cut in seven weeks on Wednesday, lowering the one-year benchmark lending and deposit rates by 27 basis points to 6.66 per cent and 3.6 per cent, respectively.
The Ministry of Finance earlier announced a raft of property boosting measures including tax cuts, waivers on stamp duty and lower mortgage rates and down payments for first-time buyers.
'The rate cut is quite insignificant for the property market but it delivers a clear message to the public that saving the property market is a high priority,' said Guangdong Real Estate Association president Cai Suisheng yesterday.
Mr Cai said Beijing would continue to give greater flexibility to local governments to adopt measures to help the market, including a relaxation of rules on buying second flats, which currently require higher down payments and mortgage rates.
According to the latest figures from the National Development and Reform Commission, average housing price in 70 major mainland cities grew 3.5 per cent year on year.
But Mr Cai believes the price is dropping but is not reflected as many developers have lowered selling prices by giving out gifts, free decorations or cash rebates. A profit tax rebate for individuals is also being mulled. 'However, the measure is controversial as it benefits mainly wealthy people and it should be used only as a last resort.'
Simon Tam, an executive director of Kerry Properties (HK), expects more measures are in the pipeline to slow the decline in home prices and transaction volumes. He believes scrapping the sales tax on project development can be one policy that will help.
UBS economist Wang Tao wrote in a report that Beijing would increase spending on low-end rental housing, encourage more investment in middle-market properties with easier access to land and credit, speed up old urban centre renovations in cities and foster housing investment in small towns.
However, lending for land and speculative property investment would continue to be restricted, Mr Wang said.
Morgan Stanley expects four more rate cuts until next year, with the base rate on one-year deposits to drop to 2.5 per cent. Banks' required reserve ratio will also be lowered and land bank lending quotas will be scrapped until next year.
Morgan Stanley believes a more comprehensive growth-boosting policy package will be announced late next month when the Central Economic Work Conference is held.