China awaits leaders' plans for soft landing in property

It is rare to see mainland lenders defend themselves - en masse - against concerns over their property-lending activities.

But that's what happened last Wednesday, just a week before tomorrow's convening of the annual meeting of the National People's Congress, at which policies will be set governing the main aspects of the world's second-biggest economy, including its frothy housing market.

A dozen banks, including the Big Four state lenders, denied they had stopped lending to the property sector. That has so far supported the Shanghai stock market, which slumped two days earlier, on February 24, after mainland media reports over the previous weekend that some banks had unplugged credit lines to the real estate sector and a few developers had cut prices in two eastern cities.

"China wants to avoid any systemic risk," said Yao Wei, chief China economist at Societe Generale in Hong Kong. "This is a move to stabilise market expectations as bank lending policy has a big impact on property market sentiment."

But Rong360, a private search engine for financial products, and real estate agents insist credit policy is tighter and mortgage approvals take longer than before.

Now all eyes are on the NPC meeting, which is expected to shed light on how top leaders plan to land the economy softly without an abrupt halt in growth.

Gentle deflation of the property bubble is vital. On that front, people will read between the lines as they look for signs of any imminent tightening measures as well as long-term reforms regarding property tax, rural land ownership, fiscal matters and the mainland's urbanisation push.

"Any breakthrough is unlikely," Yao said.

Even if top leaders made little direct mention of property policies, the meeting would still provide something to chew on, she added.

Until now, the market expectation has been for home prices to keep rising in first-tier cities such as Beijing and Shanghai this year, albeit at a slower pace, with prices possibly falling in smaller cities suffering from oversupply.

"The property market may not be as robust this year as seen in 2013, yet it will stay healthy," He Cao, chairman of state-owned Franshion Properties, said last week.

The Hong Kong-listed mainland developer, which has been snapping up plots of land in top cities, expects tighter liquidity this year.

Xu Wei, a senior researcher at the China Centre for International Economic Exchanges, a government think tank in Beijing, said: "Banks should keep their property policies steady and consistent to stabilise market expectations."

Xu noted an internal guideline from the central bank, reported by the Shanghai Securities News on February 21 but not yet published on its official website, that the People's Bank of China still wanted lenders to support first-time home buyers as well as government-subsidised affordable housing programmes, as it has done for the past few years.

The instruction was then followed by Wednesday's statements from major banks. Agricultural Bank of China said it would "keep property lending policy stable in 2014 and had not stopped property loans".