China banks urged to give first home buyers priority

The mainland's central bank called for the speeding up of mortgage loans in a statement issued hours after official data showed a deepening contraction in property transactions last month.

The People's Bank of China had a meeting with 15 major lenders on Monday and urged them to "approve and grant mortgage loans to qualified persons in a timely manner", it said, adding that first home buyers should be given priority for loans and that rates should be set at a reasonable level.

The statement came after the National Bureau of Statistics said property sales dropped 6.9 per cent in volume and 7.8 per cent in value in the first four months from a year earlier as a downward spiral seen in the first quarter accelerated.

Edison Bian, a research head for China property at UOB Kay Hian, said the latest central bank move on mortgage loans would have a limited impact but it marked the beginning of loosening credit.

"The general outlook for the property sector is still neutral, with most of the uncertainties and risks priced in the current valuations," Bian said, adding that major upside factors could be a loosening of credit and relaxation of property controls.

The property stock sub-index closed up 1.84 per cent in Hong Kong yesterday, following Monday's rise of 3.08 per cent. The rise in mainland-listed property shares was milder at 0.94 per cent after gaining 1.08 per cent on Monday.