Effectiveness of mainland housing policy easing hinges on banks
Latest policy easing measures will not immediately reverse the housing downturn given high inventory levels, but some buyers return to market
Sentiment has improved in the mainland's housing market after a policy relaxation last week, but much depends on whether the banks embrace the spirit of Beijing's move and free up lending.
Amid recent deteriorating economic indicators, the central bank unveiled a slew of measures to support home purchases and reopen financing channels for cash-strained developers, in the first such policy easing since 2010. The property market is a major growth engine for the broader mainland economy.
Some families hastened their home purchases, worrying that prices would soon start to rise again, and some developers stopped offering discounts, the South China Morning Post found during visits to five projects in a booming suburban area of Beijing before and after the policy announcement last Tuesday.
"I'm one of the end-users and will have to buy [a home] if the price looks OK," said a man in his 40s who declined to be named.
He decided not to hesitate any longer and signed a contract with China Vanke, the mainland's biggest developer by sales, for a unit at the Fun City project in Changyang, Fangshan district. The development is about an hour by subway from the capital's nearest central business district.
A three-bedroom home of about 138 square metres in the mega project cost about 3.7 million yuan (HK$4.8 million). The average price has suffered this year in a nationwide market downturn, but is now moving towards the previous record of almost 30,000 yuan per square metre hit last year.
One stop farther away from the city centre, Vanke is selling two other projects, competing with rivals including Beijing Capital Land and KWG Property. Together, they are building a new town almost from scratch, adding schools, shopping malls, office buildings and even hotels.
Despite the drizzle, the Post saw more viewers on the second visit - the first day of the week-long National Day holiday. However, the number was a far cry from that seen in the industry's heyday when buyers lined up overnight for new launches.
Still, Beijing Capital Land ended its discount of 200,000 yuan per unit for buyers who lined up for the next phase of its Ealing County project, which is awaiting pre-sale approval.
Almost all other mainland cities have lifted or relaxed home purchase restrictions in the past few months, except Beijing, Shanghai, Guangzhou and Shenzhen. Yet, home prices kept falling in September.
Many industry experts said the latest policy relaxation would not reverse the housing market downturn immediately as it would take time to sell down record inventories built up in the past few years. They also expect commercial banks not to offer the maximum 30 per cent discount on mortgage rates, given their own rising cost of funding. They have largely resisted a previous oral instruction from the central bank for cheaper mortgage loans to first-home buyers.
The discount of as much as 30 per cent on benchmark lending rates for qualified buyers was unveiled as part of the measures announced last week.
"[Mortgage] discount is possible, but definitely not 30 per cent off," said Gao Zhenjun, a loan executive from Industrial and Commercial Bank of China.
The bank has been offering mortgage rates at benchmark levels, at 6.55 per cent for loans of five years and longer, for first-home buyers in Beijing since last year. Several other banks are offering small discounts, but only to a limited number of clients.
The central bank said families who already own one unit but have paid off the mortgage should be given loan rate discounts of up to 30 per cent, but it also allowed individual lenders the flexibility to decide on their own risk assessment.