China to tighten fund flow into property market
China to tighten fund flow into property market
Shares in real estate developers plunged after news broke
Financial regulators in mainland China are preparing to constrict the flow of funds into the real estate sector, Bloomberg reported this week, citing anonymous sources. Analysts believe panic would be unwarranted though.
China’s tightening talks will likely target overheated metropolitan cities, where “genuine” demand by prospective owner-occupiers exists, as opposed to low-tier cities where such demand is lumpy.
“In contrast to past cycles, demand in these metro cities could take a break but not evaporate,” Oscar Choi, head of Asia-Pacific property at Citi Research, told Barron’s.
Chinese mortgage rates have dropped to 4.4 percent for first-time home buyers, compared with 6.7 percent to 8.5 percent in past years, Citi pointed out.
More: China’s residential market to stay strong in 2017, says Citigroup
Sources familiar to the matter tipped Bloomberg that the central bank, China Banking Regulatory Commission, and China Securities Regulatory Commission are mulling restrictions on financing for property investments of speculative nature as well as funding for land purchases.
The institutions did not immediately return Bloomberg’s requests for comment.
The Hang Seng Index dropped 1.6 percent after the news broke on Tuesday. Shares receded mostly from real estate developers and suppliers of construction materials such as cement, glass, and iron.
Bloomberg’s revelation comes after a week of property curbs unfurling throughout mainland China, where at least 21 cities have required higher mortgage downpayments and disqualified certain buyer types. Shanghai then began clamping down on unapproved price movements in residential projects around the city.
Read next: Revealed: 11 most expensive cities for luxury homes in Asia
Source: Property Report