Chinese housing demand robust in first quarter despite efforts to cool market
New mortgages hit 1.9 trillion yuan in first three months, up 11.8 per cent
Housing demand on mainland China remained strong in the first quarter despite government measures to cool the red-hot sector.
Chinese banks extended 1.9 trillion yuan (US$302 billion) in new property loans during the period, according to data released by the People’s Bank of China on Friday.
That was up 11.8 per cent from the same period in 2017 – when new mortgages totalled 1.7 trillion yuan – indicating resilient demand for housing this year, according to analysts.
Meanwhile, outstanding property loans in the first three months hit 34.1 trillion, up 20.3 per cent from a year earlier, according to the central bank. Growth in outstanding mortgages edged down 0.6 percentage points from the end of last year.
“The slowdown in growth of outstanding loans was not because the demand was weaker, but mostly because there were fewer presale permits issued by the government compared to the same period last year,” said David Hong, head of research at consultancy China Real Estate Information.
“Looking ahead, the government [will] keep rolling out cooling measures on property sales this year.”
Presale permits allow developers to recover cash before homes are built and delivered. To apply for one, developers must submit a maximum price they intend to sell a home for. It could be knocked back because of the pricing plan, or if the authorities are trying to contain growth in the sector.
China’s housing boom started with privatisation in 1998, which ended the distribution of state-owned housing and paved the way for a privately owned residential market. But since 2010, authorities across the country have sought to cool prices through measures including restrictions on second-home purchases, raising minimum down payments, tightening mortgage lending, as well as encouraging residents to rent property rather than own it.
In November, China’s second-largest commercial bank by assets, China Construction Bank, launched the country’s first residential leasing mortgage product to be used by individuals to rent rather than buy homes. The lender said it aimed to “help the government to build a healthy and reasonable residential leasing market”, according to financial magazine Caixin.
Despite efforts to rein in property, prices rebounded in the primary housing markets in March. Home prices went up by 0.1 per cent in first-tier cities such as Beijing, Shanghai and Guangzhou, while those in second-tier cities went up 0.4 per cent, according to ICBC International. In the third- and fourth-tier cities, prices rose by 0.3 per cent.
“We believe the resilient housing prices were mainly driven by strong property sales in March, especially for low-tier cities where the housing demand from immigrant workers around [Lunar New Year] formed a solid basis for a rebound in prices,” ICBC International analysts Li Xingwen and Jasper Chow wrote in a research note on Friday.
“However, with the fading of seasonality and the effects of property tightening policies, we do not expect the strong housing price growth momentum in March will remain.”