Government curbs and costly mortgages temper optimism among China’s property developers
A boom in sales in lower-tier provincial cities that had sustained the market in the past year could also wane, analysts say
China’s property developers are less optimistic about the outlook this year as authorities across the country tighten restrictions on buyers and banks make mortgages more expensive, with the boom in smaller cities that had previously fuelled growth also set to cool.
So far this year more than 90 measures to curb property buying have been implemented by cities nationwide, including eligibility restrictions for buyers, increases in down payments and direct price caps, according to property agency Centaline. Over 60 cities have also banned the reselling of homes within two or five years.
At the same time, banks have raised mortgage rates for first-time buyers, with the average interest rate now around 5.5 per cent, up from 4.46 per cent a year ago.
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“China’s property tightening has been upgraded every two to three years, and every tightening is harsher than the previous round, and now is the harshest in history,” said Wu Jianbin, chief financing officer of Fujian-based developer Yango Group. “Our internal assessment is this round of curbs will last another two years.”
Every [property] tightening is harsher than the previous round, and now is the harshest in history
A surging property market has been one of China’s main drivers of economic growth, but in recent years sky-high prices have meant many simply cannot afford homes. Concerned about the impact on social order and the potential for economic damage should the bubble burst, authorities have been actively seeking ways to cool things down.
Last week, the southern Hainan province became the latest location to place restrictions on property buying, including ruling out non-locals unless they have paid into the local social security fund for 24 months. The measures were the first in China to apply to a whole province.
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The previous cycle of cooling measures lasted less than two years between 2013 and 2014 and resulted a wave of price cutting by developers. The current cycle, by comparison, has entered its third year, and national statistics have shown that property sales volume growth in the first quarter slowed to 3.6 per cent year on year, from 7.7 per cent in the same period of 2017.
