More policy easing ahead in Chinese property market

Analysts say changes to rhetoric in the government work report regarding China's property sector, released on Thursday, signaled further policy easing. [Specail coverage]

Addressing the opening of the third annual session of the 12th National People's Congress (NPC), China's top legislature, Premier Li Keqiang said China would support demand for housing and promote the development of the real estate market.

The government in 2015 plans to build 7.4 million government-subsidized housing units, up from 7 million in 2014, of which 5.8 million will be in underprivileged urban areas, an increase of 1.1 million over last year.

The report has divided analysts over the outlook of China's property market.

Some believe the softened policy tones, the absence of references to "curbing investment and speculative demand", may pave the way for relaxation of property policies, and that the market will likely warm up this year. However, others remain on the fence, believing the sector needs more time to recover.

China's property market saw a boom following the global financial crisis, with housing prices rising dramatically. This led to ballooning inventories, which weighed down construction activity and investment as the market cooled in late 2013.

The downturn continued in 2014 and spread to most major cities, dragging economic growth down to its lowest level since 1990.

The line "support people's demand for housing for personal use and second homes" only appeared once in the 2009 government work report, and the property market that year saw a significant upward trend, a research report by China International Capital Corporation (CICC) said.

CICC predicted more relaxation to property policies, including loosening restrictions on property purchase and property transaction tax exemptions.

However, purchase restrictions will stay stringent in the metropolises of Beijing and Shanghai, due to exorbitant property prices and the need for population control, while Guangdong and Shenzhen may see technical relaxing, the CICC report said.

Zhang Dawei, chief analyst with property information provider Centaline, expects at least two more cuts to the interest rate and deposit reserve rate (RRR) within the year, which will help encourage buyers.

The government work report did not mention property tax or legislation on property tax, which suggested further delays, said Wang Tao, chief China economist with UBS.

Wang expects the government will cut payment requirement on mortgages, from 30 percent to 20 percent for first mortgage, later this year.

Yang Kewei, researcher with CEIC's China Premium Database, advised patience for the property sector to rebound, as the economy is slowing and demand structure had changed, with declining confidence and a wait-and-see sentiment among buyers.