Competition for cheap home loans seen crimping demand
Quota snapped up in minutes, leaving most buyers facing bank mortgages at higher rate
Home buyers in Guangzhou fighting for the monthly lending quota of 1 billion yuan (HK$1.3 billion) from the local housing provident fund only have a slim chance of success.
Such loans are much cheaper than mortgages from commercial banks. But last month's quota was snapped up within minutes of its release. The waiting list is long and growing.
The difficulty in securing cheap loans is crimping the property market recovery despite a slew of government measures to stimulate housing demand in the past few months.
"Everyone knows that the market now has limited room to fall further, but transactions are unlikely to revive for the rest of this year," said Li Wenjiang, chief analyst at property consultancy Hopefluent (China) in Guangzhou. He and other analysts said banks would not price their mortgage loans at 30 per cent less than benchmark rate, something encouraged by the central bank last week in the latest move to rev up the slowing economy.
Uncertainties over banks' pricing of mortgage loans have made home buyers and developers cautious. Residential property transactions in Shanghai fell 26.2 per cent year on year to 69,000 square metres during the October 1-7 National Day holiday, but average prices rose 11.4 per cent to 25,451 yuan per square metre, according to data from consultancy Shanghai Deovolente Realty.
In such circumstances, local governments needed to make more efficient use of their housing provident funds if they wanted to support first home buyers, experts said.