China's slump in property sales and construction is spurring speculation that the government's four-year-old campaign of real-estate controls will start to crack.
Citigroup sees "targeted easing" including on home purchase restrictions, while Bank of America says smaller cities may see looser rules. Centaline, parent of China's biggest real-estate brokerage, says some cities are inclined to adjust policies such as the level of scrutiny of buyers.
A 25 per cent plunge in building of new homes helped drag economic growth in the first three months of this year to the slowest in six quarters, adding pressure on Premier Li Keqiang to avert a deeper slowdown. While the government on Wednesday announced more support measures including lower reserve requirements for rural banks, Li reiterated that the nation is not considering stronger stimulus.
"The housing sector now poses the biggest downside risk to the Chinese economy," said Yao Wei, a China economist at Societe Generale. "The next batch of policy announcements is likely to be housing policy relaxation at the local government level."
The National Bureau of Statistics said yesterday that growth in gross domestic product slowed to 7.4 per cent in the first quarter from 7.7 per cent in the previous period, compared with a 7.5 per cent annual target. Industrial production in March and fixed-asset investment for the first three months of the year trailed estimates.
The State Council said last night that it would lower reserve requirements at "qualified" rural banks to provide more funds to agriculture-related industries, building on plans announced earlier this month for railway and housing spending and tax breaks to support expansion. First-quarter growth was within a reasonable range, the cabinet said.
The measures "are small in magnitude in terms of their macro impact, but send a clear signal of loosening intention", Goldman Sachs analysts said. Bank of America estimated that a cut of 1 percentage point in rural lenders' reserve ratios may release as much as 78 billion yuan (HK$98 billion) in liquidity.
The value of property sales in the first quarter fell 5.2 per cent from a year earlier and unsold completed properties jumped 23 per cent from a year earlier to 521.6 million square metres.
Sheng Laiyun, a spokesman for the statistics bureau, said that "relevant departments will closely follow the changes in the property market and improve property macro-control policies accordingly", responding to a question at a briefing on whether housing-market policies would be relaxed.
The property market has had new developments including falling prices in third and fourth-tier cities, Sheng said.
The nation's slowdown is partly being engineered by the government, which has been trying to curb a US$6 trillion shadow-banking industry and reduce overcapacity and pollution.