China eases property loan curbs as housing market slumps

[BEIJING] China eased a year-long cap on loans for the real estate sector to fund public rental housing, the latest bid by authorities to tackle a slumping property market.  

Bank loans to fund low-cost rental projects will no longer be subject to regulatory curbs, the People's Bank of China said in a statement on Tuesday (Feb 8).

The rules required banks to trim their loan exposure to the property sector to a certain level.

The move is one of the clearest signs yet that Chinese policy makers are easing up on a clampdown on leverage in the property sector that's slowing growth in the world's second-largest economy.

Starting more public real estate projects may help counter the slowdown in development as debt-laden builders preserve cash.  

The latest easing comes after banks were recently urged to lend more to developers and speed up mortgage approvals. Authorities have also made it easier for companies to obtain financing to buy assets from weaker real estate firms by excluding such debt from regulatory limits on borrowing.  

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

"It's a strong signal of credit easing," following the move to loosen M&A loans, said Yan Yuejin, research director at E-house China Research and Development Institute.  

Under the lending limits that took effect in January last year, China's largest state-owned banks were told to trim their loan exposure to the property sector to 40 per cent or less.

Banks' mortgage lending was capped at 32.5 per cent of outstanding credit. Those exceeding the limits were given a grace period of four years to meet the requirements.

Affordable Rentals The central bank on Tuesday also called on lenders to boost support for affordable rental homes by providing "legitimate" and "commercially sustainable" financial services and products, as long as risks are controllable.  

China is stepping up efforts to develop more rental properties, as homes in big cities are largely unaffordable for many young people and migrant workers after years of rapid price gains.

That's in line with President Xi Jinping's push for "common prosperity."  

"Construction of affordable rental projects may accelerate after the move, potentially helping arrest a slowdown in residential development," Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong Ltd., wrote in a note.

A total of 6.5 million homes for leasing purposes will be built across 40 major cities in the five years through 2025, the Ministry of Housing and Urban-Rural Development said last month.

The homes will account for around 26 per cent of new housing supply in the cities during the 14th five-year plan period and benefit 13 million young people and new residents, it said. BLOOMBERG