Banks more willing to lend to homes sector
First-time homebuyers and developers on the mainland have started to see more enthusiasm from banks about issuing loans, with lenders flush with cash after the central bank cut the reserve ratio requirement for the first time in three years.
Lenders have begun asking developers such as Agile Property Holdings and Longfor Properties to draw down loans, according to Alan Jin, head of regional property research at Mizuho Securities Asia.
In cities such as Beijing, Shanghai, Guangzhou and Xiamen, banks have reportedly slightly eased mortgage lending requirements.
However, analysts say the modest easing in lending limits will not significantly improve the property market - though it is a sign that credit conditions will not get worse. Sales have fallen by half, prices are falling and steeper drops are forecast next year.
Shares of mainland property developers surged on the back of the positive news, with Agile Property up 9.38 per cent to HK$6.88, China Resources Land gaining 9.06 per cent to HK$13. Evergrande Real Estate rose 7.96 per cent to HK$3.12 while China Overseas Land gained 5.45 per cent to HK$14.32.
The National Development and Reform Commission, the top economic planning body, said measures to curb speculation and regulate home prices to keep them at reasonable levels would stay in place next year.
Many banks now charge first-time homebuyers mortgage rates above the benchmark lending rate, said Alan Chiang Sheung-lai, of property consultant DTZ. 'When liquidity was very tight two months ago, they charged them 1.1 times the central bank's benchmark rate [of 7.05 per cent],' he said.
The People's Bank of China two weeks ago lowered the reserve ratio requirement - the proportion of assets they must hold in reserve - by 50 basis points. This lowered the ratio to 21 per cent for large lenders and 17.5 per cent for small and medium-sized lenders. The reduction is expected to release about 400 billion yuan (HK$489 billion) in deposits into the banking system that could be used for lending.
Agile has been receiving calls from banks requesting they draw down development loans, according to Mizhuo's Jin, who recently visited the firm's management. 'We believe bank lending to the sector will improve gradually from here and that the large, quality developers will be the first to benefit,' said Jin.
However, DTZ's Chiang said 400 billion yuan would not significantly soften the credit squeeze. Still, the cut in the ratio requirement indicated the government may stop further tightening liquidity for now.
Feng Huiming, an executive director of Shenzhen-based developer Fantasia Holdings, said there was no significant change in credit conditions for developers. 'From now to March will be the darkest period for [the] Chinese property market.'
Rating agency Moody's also expects developers to face continuing challenges in the near term, with slowing sales, tight bank credit and downward pressure on property prices and profit margins.
'Regulatory controls targeting the property sector are unlikely to be relaxed in 2012. We expect [the] ... government will continue to try to curb increases in property prices,' it said.