Many a mainlander received Lunar New Year wishes for the dream of home ownership to come true in the Year of the Horse, but the banks are providing a harsh dose of reality. Lenders are tightening their mortgage policies, keeping the dream of owning a property just that for the millions priced out of the market. While home loans are getting harder to secure, property prices may face downward pressure, analysts say, benefiting those who can afford to buy without a loan. “Results from our latest survey on property loan information across major banks in major Chinese cities surprised us – in a bad way,” said Edison Bian, an analyst with CCB International. “Credit conditions are far worse than we expected.” Bian expects the Hong Kong-listed mainland property stocks that he covers to trade at deeper discounts to their net asset value and has lowered his share price targets, he said in a research report last week. He now expects Agile Property to trade at a 65 per cent discount to NAV, instead of the 55 per cent he expected earlier. For some developers, he has widened the discount to NAV by as much as 20 per centage points. Bian was one of many analysts who expected the property market to get off to a roaring start in the first quarter, on the assumption of relaxed bank lending in the new year. Discounts on mortgage loans are rarely seen now, because the funding costs of Chinese banks have risen and mortgage demand is surging Luo Jun, Beijing Capital Land However, mortgage loans have now been priced higher, and approvals are taking longer than expected, although quotas have been increased at the big state banks and in major cities such as Beijing and Shanghai, CCB International’s latest survey shows. Luo Jun, chief finance officer at Beijing Capital Land, said more and more mainland banks are confining their lending to developers on their own lists, mostly big, state-owned companies. “Banks encountered liquidity problems earlier this year, but they are easing now,” Luo told reporters in an earnings conference on Monday. “Discounts on mortgage loans are rarely seen now, because the funding costs of Chinese banks have risen and mortgage demand is surging.” The Beijing branch of China Construction Bank, the mainland’s biggest property loan lender, now charges buyers of first homes the benchmark mortgage rates. A few months ago, it was offering 15 per cent off those rates for such borrowers. Bank of East Asia requires a 20 per cent premium on the benchmark rates from all homebuyers in Beijing. First-home buyers, by state policy, may enjoy a 15 per cent discount on mortgages, while second-home buyers need to pay 10 per cent above the benchmark rates, as part of mainland authorities’ efforts to curb property speculation and cool down housing inflation. Banks are permitted to price their loans higher, as Beijing has scrapped a ceiling on lending rates as part of measures to liberalise the mainland’s interest rate regime. The property market will cool down when banks tighten credit Jin Ruixin, Centaline In the past, mainland banks cut property lending and other loans towards the end of each year but then rushed to make new loans at the beginning of the following year as their lending quotas were replenished. However, this year has turned out to be different, at least on the property front, with lending to other sectors offering higher returns. The central bank will announce overall lending data for last month later this week or early next week. But it offers a breakdown by sector only on a quarterly basis. “The property market will cool down when banks tighten credit,” said Jin Ruixin, a research director at property agency Centaline in Beijing. “The outlook for this year is not as good as before.” Home sales, measured by floor space, fell last month from December in all the top 10 cities monitored by the China Index Academy, the mainland’s biggest real estate data provider. Sales plunged 36.8 per cent in Beijing and 30.7 per cent in Shanghai. The decline was partly due to the seven-day Lunar New Year holiday, which started on January 31. Home prices, however, kept surging last month, with those in Beijing climbing 24.3 per cent from a year earlier.