Beijing's credit easing gives hope to cash-strapped property developers

For cash-strapped developers on the mainland, credit-relaxation measures announced by Beijing offer the prospect of an easing of mounting liquidity risk as the property market downturn deepens.

Of the 14 major mainland developers monitored by Mizuho Securities, only four - China Resources Land, Sino Ocean Land, KWG and China Vanke - have managed to maintain positive operating cash flows, with only Vanke doing so consistently since 2008.

The People's Bank of China and the China Banking Regulatory Commission last Tuesday announced the first easing of housing policies since 2010. They redefined first-time buyers and lowered the preferential mortgage rate for them. Those who have fully repaid an outstanding mortgage loan will be considered first-time home buyers, the central bank and CBRC said in their joint statement. Thus, they only need to come up with 30 per cent deposit, instead of 60 per cent.

Analysts have described the loosened mortgage rules as significant, but caution the impact will take time to flow through to the market.

The stakes are high for developers, which have been unable to boost sales through price cuts - despite the peak autumn sales season under way - and have seen the shadow banking sector become less supportive.

The scale of the challenges facing mainland property firms was highlighted by data on Thursday that showed home prices fell for a fifth consecutive month in 100 big cities. The average new home price dropped to 10,672 yuan (HK$13,484) per square metre in September, down 0.92 per cent from August, and off 0.59 per cent from the previous month, data provider China Index Academy said.