China’s developers gain on reports of Shanghai cutting first-home mortgage rates to revive market

Shares of China’s property developers rose on Friday on reports that two state-owned banks in Shanghai have lowered their first-home mortgage rates to ease buying restrictions after two years of controls to cool the overheated market.

Property agents and mainland state media said borrowers would be eligible for a 10 per cent discount off the benchmark interest rate, up from a previous 5 per cent, at the Shanghai branches of the Industrial and Commercial Bank of China and the Agricultural Bank of China from Friday. This means the rate will be lowered to 4.41 per cent from 4.655 per cent, they said.

In the mainland, China Vanke jumped 3.1 per cent to 23.18 yuan, China Merchants Shekou industrial Zone Holdings was up 2.6 per cent to 17.27 yuan and Poly Real Estate gained 1.5 per cent to 11.70 yuan. Nacity Property Service jumped 10 per cent to 26.80 yuan and Shanghai Wanye Enterprises surged 6.5 per cent to 12.44 yuan. A property stock gauge under the benchmark Shanghai Composite Index rose 1.1 per cent.

In Hong Kong, Agile Group rose 4.7 per cent to HK$12.34. Guangzhou R&F Properties soared 5.6 per cent to HK$15.02 and Sunac China Holdings was up 5.5 per cent to HK$26.10.

The rate cut was refuted by the two banks after the market closed, which analysts said, reflected the level of sensitivity to China’s mortgage policy. But an ICBC executive confirmed that the lenders were compelled to retract the cut following “intense reaction in the market” that led to share price swings.

ICBC issued a statement on Friday reiterating that its mortgage policy remains unchanged.