Beijing's grip slows development cash

PUBLISHED : Saturday, 10 September, 2011, 12:00am
UPDATED : Saturday, 10 September, 2011, 12:00am


Investment in property development on the mainland is slowing amid Beijing's continued measures to tighten lending and restrict demand.

Developers are increasingly being required to use more of their own funds to finance projects as banks squeezed lending.

Investment in the sector grew 33.2 per cent to 3.78 trillion yuan (HK$4.61 trillion) in the first eight months compared with the same period last year, according to the National Bureau of Statistics.

The growth was modestly slower than in the first seven months when investment increased 33.6 per cent.

Investment in housing saw year-on-year growth of 36.4 per cent in the first eight months, the same growth as achieved in the first seven months. In the first five months, year-on-year growth was 37.8 per cent.

Mainland home sales rose 24.4 per cent in value terms in the first eight months of the year from a year earlier to 2.78 trillion yuan, according to the bureau.

As banks have tightened lending, developers have been forced to use more of their own funds to finance projects. Developers' own funding of projects came to 296 billion yuan in August, representing 42.98 per cent of their total funding. In July, the percentage was 41.24 per cent.

International property consultant DTZ said that while new construction in the mainland skyrocketed to 1.64 billion square metres last year and reached 994 million square metres in the first half of this year, bank lending was not catching up. 'The situation means developers have to be more proactive in their pricing strategy to boost sales,' said DTZ.

Tightened lending is one of the key measures adopted by the central government to curb the price gains in the property market.

In January, the central government unveiled a package of eight austerity measures to put the brakes on rising property prices. For the first time, local governments were required to set targets for average home prices. Following guidelines set by Beijing, 35 major cities moved to restrict registered resident owners in those municipalities from buying more than two flats.

The State Council said in July that the same restrictions would be imposed in smaller cities.

On August 25, Taizhou became the first among the smaller cities to announce the home purchase restriction - the only small city to adopt the policy.

Lee Wee Liat, regional head of property at Samsung Securities (Asia), said that over the past two weeks, some mainland cities such as Shaoguan in Guangdong, Yantai in Shandong, and Qinhuangdao in Hebei had reiterated their price cap policies.

'We view these as local governments' attempts to avoid a home purchase restriction policy by choosing alternative and less harmful ways of taming property prices,' said Lee.

Another 20 to 30 cities are expected to join the home purchase restriction policy.


The increase in property development investment in the first eight months this year to 3.78 trillion yuan