China real estate: ‘recovery of market confidence has accelerated’, sector is on the mend, People’s Bank of China official says
- Bank loans increased by 230 billion yuan (US$33 billion) between September and December last year, PBOC deputy governor says
- Expect widening support and clear market interventions from ‘two sessions’ meetings: Moody’s
Bank loans for real estate development increased by 230 billion yuan (US$33 billion) between September and December last year, an increase of 420 billion yuan year on year, Pan Gongsheng, the People’s Bank of China’s (PBOC) deputy governor, said in Beijing on Friday.
Domestic bond sales by property developers amounted to 120 billion yuan in the fourth quarter of last year, up 22 per cent year on year, he added.
“In January this year, loans for real estate development increased by more than 370 billion yuan, an increase of 220 billion yuan year on year,” Pan said. “Domestic bond sales by property developers were 40 billion yuan, an increase of 23 per cent year on year.”
Since late 2022, Beijing has been taking measures to prop up the world’s largest home market and prevent a collapse. It introduced the “three arrows” liquidity package to save developers and lower mortgage rates to spur sales.
As Beijing adjusted its Covid-19 control measures and reopened its economy to the world in mid-December, its support for the property sector became more effective, he added.
Since the second half of 2021, dwindling mid-to-long term demand for housing and the impact of the three-year coronavirus pandemic on employment and income expectations had amplified the spillover of risks in the real estate market, he said. A group of developers that included debt-laden China Evergrande Group had suffered from “high blood pressure” and eventually “a stroke”, as their balance sheets were exposed to high risks constantly, Pan added.
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China is still seeing urbanisation and there is great demand for improved housing, he added on an optimistic note.
Meanwhile, local authorities are following suit and easing their property rules as well. In December, the megacity of Chongqing allowed immigrants to enjoy the same mortgage policy as locals, while the hi-tech manufacturing hub of Dongguan in southern Guangdong province lifted a ban on individuals buying new homes.
“The PBOC announced plans in January to dial back its strict ‘three red lines’ policy,” Moody’s analysts wrote in a note ahead of “two sessions”, the annual meeting of China’s two main political bodies beginning Saturday.
“We expect widening support and clear market interventions out of the meetings.”