Experts foresee more support for realty

China will likely adopt more supportive measures for the real estate industry on both demand and supply sides, thereby ensuring its healthy development to boost overall economic growth, experts said on Friday.

They made the comments as the CPC Committee at the People's Bank of China, the country's central bank, held a meeting to study the spirit of the Central Economic Work Conference held in December.

The conference had stressed precise implementation of city-specific housing credit policies meeting reasonable financing demand of real estate enterprises under various forms of ownership without any discrimination, and strengthening support to the "three major projects", to promote transformation and high-quality development of the real estate industry.

The "three major projects" refer to the development of affordable housing projects, the redevelopment of shantytowns and the construction of recreational facilities that can be easily converted into emergency structures (like makeshift hospitals during epidemics).

"We expect that an additional amount of 300 billion yuan ($41.69 billion) to 500 billion yuan of pledged supplementary lending or PSL is likely to be used to extend funding to affordable housing and shantytown redevelopment projects," said Zhang Ning, senior China economist at UBS.

"Besides, there remains potential for further reductions in both mortgage interest rates and down payment requirements at the national level, as well as for easing purchase and house loan restrictions in select first — and second-tier cities that command high demand."

Together with the efforts to expedite the completion of construction projects, such measures would help ensure a moderate infusion of funding to help further stabilize the real estate market, he said.

Major Chinese cities reported falling home prices in February, though month-on-month declines narrowed, data from the National Bureau of Statistics showed on Friday.

Compared to a year ago, the 70 large and medium-sized cities monitored by NBS in general saw price drops due to a high base, the NBS said.

Shi Lulu, director of Asia-Pacific Corporate Ratings at Fitch Rating, said property sales sentiment in China remains weak, despite recovery after supportive policies were announced.

"We expect the Chinese government will continue to roll out supportive policies to stabilize the housing sector. The latest large cut to the five-year loan prime rate and expansion in the central bank's balance sheet suggest that the authorities are intensifying efforts to stem the property sector's downturn," Shi said.

LPR is a benchmark interest rate commercial banks use for long-term lending. China's central bank lowered the five-year LPR by 25 basis points to 3.95 percent on Feb 20.

Shao Yu, a board member of the Shanghai Institution for Finance & Development, a think tank, suggested that policy banks or even commercial banks should consider acquiring unsold real estate inventory. This might necessitate funding with lower interest rates to provide essential support for the acquisition, and if relevant monetary policy tools are effectively implemented, it would significantly aid in this endeavor, he said.

The PBOC meeting on Friday also asked the agencies and institutions concerned to prevent and defuse financial risks in key areas stably and effectively.

Ji Guangheng, president of Shenzhen-based Ping An Bank, said the lender is currently not under "systemic stress" regarding the risk of defaults in the property industry, as "we have internal stress tests and related measures to cope with them".

Moreover, the collateral rate, which refers to the ratio of loans to the value of collateral, of the bank is relatively low and property projects related to it are mainly in developed regions such as the first-tier cities, he said.

As of June-end, Ping An Bank's collateral rate for property development loans was 42.6 percent.

Wu Leiming, chief risk officer-designate of Ping An Bank, said the lender has long been in partnership with property developer Vanke with focus on quality projects and key regions. "The overall risk in our cooperation remains manageable," Wu said.