PBC’s credit easing policy begins to show effect

Beijing's second-hand home market has shown some signs of improvement following the central bank's recent policy to ease controls on housing loans, though the sector's outlook remains unclear, real estate brokers said on Tuesday.

"Nine transactions in second-hand homes were made during the National Day holidays through our office, up 50 percent from the same week in September," said Jiang Shu­qiang, a property broker at a Homelink Real Estate Agency office in Beijing's Chaoyang District.

No official data is available yet as most government agencies and companies were still on holiday on Tuesday.

"So far our branch has sold six [second-hand] homes during the holidays alone, which is much better than the whole of September when the total number of transactions was just two or three," said Li Chengfu, a broker at JJDC Property Co, another real estate agency in Beijing.

The average price also increased slightly, moving from the range of 32,000 yuan to 35,000 yuan ($5,203-$5,691) per square meter in September to the current 35,000 to 40,000 yuan per square meter for an existing home built before the 1980s in Tuanjiehu, an old residential block near Beijing's East Third Ring Road.

Despite some month-on-month improvement in transactions, the number of deals during the holidays is half of those inked in the same period of 2013, said Wang Yanxing, a broker at 5i5j.com, a property brokerage service provider.

Majority of the potential buyers are still holding back purchases, waiting for banks to implement the latest easing policy, Wang said.

The People's Bank of China (PBC), the central bank, said on September 30, right before the National Day holidays, a raft of measures to ease mortgage conditions for homebuyers, as property sales have been declining since January 2014.

The central bank's policy to ease home mortgage controls has helped lift the market sentiment to some extent.

Second-time buyers will be treated as first-time home buyers as long as they have repaid previous home loans, and they now can enjoy a 30 percent down payment and an interest rate as low as 70 percent of the PBC's benchmark rate, compared with a 50 percent minimum down payment and benchmark interest rate of at least 110 percent previously.

As a result of these measures, US rating agency Moody's expected a fall in the mortgage lending rate but said on Monday that significant cuts are unlikely because profitability remains banks' top goal.

"The mortgage easing policy will change the market expectation, but it is still difficult to say that home prices will climb given the high inventory," said Li Jingguo, a research fellow at the Institute for Urban and Environmental Studies of the Chinese Academy of Social Sciences.

Home prices tend to be stable in major cities such as Beijing and Shanghai, yet the situation in smaller cities is not optimistic as supply outweighs demand, Yang Hongxu, deputy head of E-House China R&D Institute, told the Global Times.

Even though the mortgage easing policy is positive news, other factors including slowdown of the economy and relatively tight monetary policy still weigh on the property market, Yang said.

China's easing of mortgage lending terms will benefit property developers but the negative outlook for the housing sector will remain, Moody's said.