(Bloomberg) — China’s efforts to shore up the troubled real estate market are expanding to some of the country’s biggest cities, with officials stepping up to stem the economic damage from the recession.
The Shanghai branch of China’s central bank urged commercial banks to accelerate real estate lending and ensure growth in both residential mortgages and loans to developers over the next few months, people familiar with the matter said on Tuesday. Meanwhile, banks in the southern city of Guangzhou have started cutting mortgage rates for some homebuyers.
The moves indicate that policy emerging from smaller cities with weaker economies is beginning to spread to some of its biggest centres, as policymakers try to engineer a soft landing for the property market. While most residential sales come from third and fourth tier cities, large urban centers such as Shanghai are often seen as a symbol of buyer’s confidence.
In previously unreported guidance earlier this month, regulators in Shanghai said growth in mortgages should not be slower than expansion in other loans, the people said, asking not to discuss private information. The Shanghai branch of the People’s Bank of China did not respond to a request for comment.
At least seven lenders, including four of China’s biggest banks in Guangzhou, have reduced their mortgage rates by 20 basis points, the Nanfang Daily reported on Monday afternoon. According to local media reports, several cities, including Chongqing, cut payments to mortgage payments for some homebuyers last week.
The rate cut in Guangzhou is “the most significant change in policy in the asset sector so far this year,” Pinpoint Asset Management’s chief economist Zhang Zhiwei wrote in a note before Bloomberg reported the guidance in Shanghai. “While the market is hopeful that the policy in the property can be fine, investors did not expect the change in Tier 1 city to happen so quickly.”
Home sales in China have been falling since July, adding to the cash crunch among developers. Top tier cities began to decline late last year, data from China Real Estate Information showed as regulators tightened financing rules to mitigate risks.
News of a cut in mortgage rates in Guangzhou boosted iron ore prices in Singapore on Monday, falling slightly on Tuesday. It also fueled speculation that easier mortgages mean the People’s Bank of China may need to lower benchmark interest rates further, helping push China’s bond futures down.
Read more: China urges banks to boost property lending over default fearsChinese banks cut lending costs as PBOC signal easing not the end
The central bank has moved to an easier mode to stabilize growth and prevent financial distress from the real-estate sector which accounts for nearly a quarter of economic output. Last month, real benchmark lending rates were lowered after the central bank cut policy interest rates and offered more incentives.
While the five-year loan prime rate, a reference for long-term loans including mortgages, was lowered by just 5 basis points, it paved the way for banks to lower mortgage rates.
State media reported on Tuesday that support for credit would continue despite policy rates and lending rates remaining unchanged this month, with the China Securities Journal publishing a front-page report on Tuesday, citing analysts as saying that rate cuts and There is still room for bank reserves. requirement ratio.
–With assistance from Lin Zhu.
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