Mainland lenders end rate discounts for home loans

Blow for developers expecting brisk activity in traditional sales months of September, October

PUBLISHED : Thursday, 13 September, 2012, 12:00am
UPDATED : Thursday, 13 September, 2012, 3:07am

Big mainland banks have cancelled their discounts on first mortgage lending rates, dashing developers' hopes of strong home sales for this month and next, traditionally a peak period for housing sales.

The lenders including Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China were yesterday reported to have ended discounts on home loan rates of as much as 15 per cent.

"We have heard of this happening in a few cities, such as Beijing, Shanghai, Shenzhen, Taiyuan and Sanya. Apparently, ICBC, CCB and ABC have stopped their discounts," said Lee Wee Liat, the head of property research at BNP Paribas Securities.

Lee said he expected sales to fall over the next three months because of the move.

The market has seen a recovery in sales since May, driven by strong real demand and nationwide interest rate cuts.

As a result, housing stocks in the four first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen fell to 8 to 12 months, from 14 to 19 months in December last year, according to a research report by Nomura Hong Kong released this week.

Prices of new homes edged higher last month for a third consecutive month of growth, with 63 of 100 cities reporting an increase in prices, according to the China Index Academy, an affiliate of SouFun Holdings, the nation's biggest real estate website. The data shows home prices edged up 0.24 per cent from July to 8,738 yuan (HK$10,700) per square metre.

Alan Jin, a property analyst at Japanese brokerage house Mizuho Securities, said news of the end to the mortgage rate discount was a negative for the market as it indicated that banks were tightening their lending.

"But the impact will not be very significant," Jin said, since banks only offered 15 per cent discounts on first mortgage interest rates to a small number of valuable clients.

The Nomura report showed that new home sales had started declining after rising for a few months.

"Primary property transactions in first and second-tier cities were down 23.3 per cent and 9.9 per cent respectively, week on week, due to a high base in the preceding week," the report said.

But last week's aggregate sales in 10 major cities were still up 55 per cent year on year, it added.