Beijing's interest rate cut spurs rush on new housing projects

First-time homebuyers and upgraders on the mainland are taking advantage of lower borrowing costs during the market downturn, with flats sold out on the first day of launch at a new project in Shenzhen.

Property agents said they believed last Friday's surprise rate cut could stimulate buying but a full recovery of the ailing property market was still some way off.

On Saturday, when the Qianhai Shidai project was launched in Shenzhen's Qianhai, it sold all 675 units at an average of 42,000 yuan (HK$53,000) per square metre the same day, according to the mainland's largest property website, Soufun.

"The rate cut has encouraged buying demand as some cautious potential buyers who were waiting on the sidelines have now decided to act," said Kenneth Pak Kei-yuen, a general manager at Midland Realty's Beijing office.

Developers are the major beneficiaries of the latest rate cuts. Project launches such as Qianhai Shidai have been attracting long queues the first weekend after the People's Bank of China cut the benchmark lending rate for the first time in more than two years. The central bank cut the one-year benchmark lending rate by 40 basis points to 5.6 per cent and the one-year benchmark deposit rate by 25 basis points to 2.75 per cent.

Pak said he expected home sales in the secondary residential market to pick up in coming weeks as upgraders searched more actively for bigger flats.

"[The rate cut] is very positive for the housing market as it will lower the borrowing cost for homebuyers as well as developers," said Edison Bian, an analyst at UOB Kay Hian.