Property market likely to stabilize Last Updated(Beijing Time):2008-11-28 07:59
The central bank's rare big interest rate cut will help stabilize the property market but will not ease property developers' tightened cash flow, experts said.
The People's Bank of China cut the benchmark interest rate by 1.08 percentage points on Wednesday, the biggest slash in 11 years, lowering the one-year lending rate from 6.66 to 5.58 percent.
"The rate cut, which can help cut the cost of property developers' financing and property buyers' individual mortgage, is definitely good news to the real estate industry," said Qin Xiaomei, research chief at CB Richard Ellis' Beijing branch.
The cut means a homebuyer could save as much as 900 yuan each month on a 10-year, one-million yuan mortgage.
"But the rate cut will hardly revitalizes the sluggish nature of the market," said Qin.
Property prices in China's 70 large and medium-sized cities rose 1.6 percent year-on-year in October, the lowest growth rate since 2006, according to the National Development and Reform Commission.
James Macdonald, a Savills Research Department senior manager, agreed.
"The main impact of the rate cut will be to help stabilize the market by supporting the economy," said Macdonald. "While individuals will take the interest rate cut into account, their main consideration will still be the overall health of the property market and whether they believe property prices will continue to fall or not."
The lending rate for real estate firms also dropped, but the question is whether they can get loans from the banks at all now, said Qin.
Rising risk in the property sector mean most banks are more prudent with loans to real estate firms.
"Bad loans from property developers may see a big jump after the Spring Festival," said a manager with Industrial and Commercial Bank of China, the country's largest lender.
The tightened cash flow has already prompted many real estate firms to sell their projects at assets and equity exchanges
Over 60 projects have been transferred in the equity exchanges in Beijing, Tianjin Shanghai and Chongqin since September, according to the four equity exchanges' own statistics.
"The market may warm up in the second half of 2009 or the first half of 2010, but that still depends on the recovery of the global market," said Macdonald.
As prices fall, sales rise in HK Last Updated(Beijing Time):2008-11-27 13:50
Hong Kong existing home sales posted a fourth consecutive weekly gain last week as falling prices lured buyers who have previously shunned the city's property market.
Transactions at 10 of Hong Kong's biggest private apartment projects rose to 44 in the week ended November 23, from 39 a week earlier, according to figures compiled by the city's Centaline Property Agency.
The city's worsening economic outlook, coupled with declines in the stock market, has curbed demand and led buyers to expect cheaper prices, Bloomberg News said. Home prices have fallen 22.4 percent since reaching a near 10-year high in March, according to Centaline figures.
The ratio of transactions for apartments at less than HK$2 million (US$258,000) rose to a 14-month high of 58.4 percent in the first 20 days of November. The ratio was 55.3 percent for the whole of October.