China's stuttering housing market shows signs of life as banks make it easier for first-time buyers to get mortgages approved

Asia's Tech News Daily

beleaguered housing market, support the market, cash-strapped developers, overreacted to the developers’ plight

China’s beleaguered housing market is showing signs of life after banks made it easier for buyers to get their mortgages approved.

New homes covering a total area of 12 billion square metres (129 billion square feet) in 42 major cities were sold in the first 20 days of November, 12 per cent more than in the same period the previous month, according to Central Wealth Securities, a Chinese broker.

The increase comes after regulators called on lenders to support the market by easing the stringent home loan approvals they had introduced previously to help tame runaway property prices.

“The recent positive news about the mortgages has boosted some buyers’ confidence, but more are still waiting on the sidelines,” said Cai Hongfei, an analyst with the Central Wealth Securities.

Chinese authorities at the city, provincial and central government level have taken steps to ease policies to boost the flagging housing market after cash-strapped developers such as China Evergrande and Kaisa Group Holdings began struggling to stave off defaults.

At a press conference on October 15, senior central bank officials said some financial institutions had overreacted to the developers’ plight by tightening the mortgage approval process.

Personal home loans in China rose by about 1 per cent to 37.7 trillion yuan (US$5.92 trillion) in October from the prior-year period, according to the People’s Bank of China.

That represented a 101.3 billion yuan increase over September, when home sales fell sharply as buyers were spooked by the distress afflicting the mainland’s property developers.

“The slowdown of China’s real estate sector has become a major factor weighing down the country’s economic growth and it is mainly due to the tightened credit,” Standard Chartered economists Hunter Chan and Shuang Ding wrote in a report. “We are expecting the credit environment towards property to improve in the coming quarters and we have seen strong signals from the authorities.”

China’s economy grew by 4.9 per cent in the third quarter of 2021 compared with a year earlier, a much slower pace than the 7.9 per cent growth seen in the second quarter.

The country’s monthly benchmark price index for new homes fell for the first time in six years in September, by 0.1 per cent on a monthly basis, according to the National Bureau of Statistics (NBS). It dropped by a further 0.25 per cent in October.

Vice-Premier Liu He said at a financial forum in Beijing in October that “reasonable capital needs” of the property sector will be met to promote the healthy development of the market.

The economists with Standard Chartered expect that China’s outstanding property loans by the end of 2022 will be up 10 per cent year-on-year.

The property sector has turned sour since Beijing stepped up its scrutiny of developers with its “three red lines” leverage targets in August last year, barring heavily indebted companies from borrowing money.

The government has tried to slow down red hot home sales by tightening up mortgage practices, which has led to delays in loan approvals of up to 108 days in some cities.

In October the China Banking and Insurance Regulatory Commission urged banks to support first-time homebuyers by easing their down-payment ratios and mortgage rates.

As a result, the average interest rate for first-time buyers in 72 cities monitored by the Beike Research Institute in November was 5.69 per cent, 4 basis points lower than last month.

The average wait time was 68 days, 5 days shorter than in October.

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