Advertisement
Advertisement
Property policies
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Residential apartment and commercial buildings are seen in Beijing as relaxation measures are seen boosting the property market. Photo: Bloomberg

New | China’s property sales seen to rise on policy relaxation as developers destock

“More supportive policies will come out in the pipeline to boost residential transaction volume” -- Lee Wee-liat, head of property research at BNP Paribas

Mainland China’s property sales are expected to pick up this month after a weak February as policy relaxation warms up buyers’ sentiment and encourages developers to redouble destocking efforts, analysts said.

The People’s Bank of China cut interest rates earlier than expected last week, the second time it has done over the last three months.

“More supportive policies will come out in the pipeline to boost residential transaction volume,” said Lee Wee-liat, head of property research at BNP Paribas.

He added that mainland banks would lower mortgage rates more than the benchmark cut of 25 basis points as they were becoming increasingly willing to offer discounts.

A survey by Rong360, a mainland financial product search engine, found Bank of China, Huaxia Bank and Agricultural Bank of China increased mortgage rate discounts to 12 per cent after the Lunar New Year from the previous 10 per cent. They maintained the level after the rate cut.

However, it found that HSBC lowered its discounts to 10 per cent from 12 per cent previously in Guangzhou and Shenzhen after the rate cut, adding that liquidity stayed ample in first-tier cities.

“I don’t see a significant collective increase in banks’ exposure to the property sector,” said Liao Qiang, senior director at global ratings agency S&P.

He added the property market slowdown would push up banks’ non-performing loan ratio to the real estate and construction sector to 1 per cent this year from 0.49 per cent at the end of 2013, but overall risk is still manageable partly due to their strong liquidity and high collateral coverage.

About 13 per cent of commercial bank loans are channeled towards the real estate and construction sectors, and another 15 per cent to residential mortgages, it said.

In the agency’s hard-downside scenario of a 20 per cent fall in home price, which is unlikely in the next 12 months, banks’ NPL ratio in the property sector will hit up to 8 per cent.

Premier Li Keqiang said China would “promote a stable and healthy development of the property market,” without going into details.

A deputy central bank governor, Pan Gongsheng, said on the sidelines of the meeting that the central bank was studying the necessity of further property policy relaxation, although he would not confirm market talk of a reduction in downpayments which stand at 20-30 per cent for first-time home buyers and 60-70 per cent for second-time buyers now.

New home sales in major cities tracked by consultancy China Index Academy slumped 44.5 per cent in February from January and fell 15.7 per cent from a year earlier.

Consultancy Centaline China said in a report that transactions would pick up in March, a traditional hot season.

But it cautioned against any significant rebound, as many potential buyers had already come back to the market in the last quarter of 2014 after the central bank ended its five-year-long property tightening stance in September.

China Vanke, the mainland’s biggest homebuilder in sales, said earlier this week that it would launch projects worth between 10 billion to 15 billion yuan this month, up from February’s 6 billion.

It reported a 64 per cent slump in contracted sales last month from January, resulting in a prolonged destocking period. The sales drop was partly because people went on vacation to celebrate Lunar New Year.

Post