The People’s Bank of China (PBOC) pledged to maintain healthy development of the real estate market at a time that embattled China Evergrande’s liquidity crunch sparks concerns about the country’s massive real estate sector.
It is important to “maintain the healthy development of the real estate sector and the lawful rights and interests of residential housing consumers,” the central bank said in its third-quarter monetary policy meeting on Monday.
That marks the first time since the first quarter of 2009 the central bank included comments about the real estate market in its quarterly policy report. Some believe the statement suggests policymakers are prepared to prevent any contagion in the industry amid signs of distress among highly indebted developers.
The statement is, to some extend, targeted at the recent difficulties faced by some large property developers, said Yan Se, chief economist at Founder Securities, in a reference to China Evergrande Group that is struggling to raise funds to deal with a massive cash crunch.
Last month the PBOC and the China Banking and Insurance Regulatory Commission (CBIRC) summoned the Guangzhou-based homebuilders for talks and instructed the company’s management to do their best to maintain the healthy and steady development of the real estate market.
“We need to be well prepared for risks to commercial banks and individual creditors that are passed on from large property firms that are experiencing difficulties,” Yan said.
The comments come amid growing concerns about the real estate markets, with housing markets in most cities cooling significantly and an increasing number of homebuilders facing operational difficulties amid tougher regulations and slower sales, said China Index Academy, one of the country’s largest independent real estate research firms.
“That’s a signal for stabilization of the housing market, which is in line with the central government’s overall policy stance that prioritise stability,” it said.
The PBOC specifically mentioned protecting home buyers’ lawful rights, and that should refer two aspects: home buyers’ rights to get home mortgage loans in a timely way and their rights to have their homes delivered on time, said Yan Yuejin, research director at the E-House China R&D Institute.
“It happens a lot recently that some home buyers can’t get or wait for too long for home mortgage loans after signed home purchase contracts as banks in some regions tighten home mortgage quota,” said Yan.
In addition, many property developers are facing liquidity issues and that lead to some unfinished property projects, Yan said. “Both of the situations hurt home buyers’ lawful rights.”
Notably, the state-backed newspaper Economic Daily said in a recent commentary that, more targeted and precise property polices to rein in housing market speculation will help create more favourable conditions for home purchases by those who have a real demand.
“Policies should be more friendly to those who have a real housing demand and prevent hurt them unintentionally,” according to the newspaper.
Banks in some regions are tightening home mortgage loans for both new homes and second-hand homes, with some halting mortgage loans for second-hand home purchases. That has led to a rapid slide in home sales and prices, which could bring volatility to the housing market, said Li Yujia, chief researcher at Guangdong Provincial Housing Policy Research Center.
“The PBOC’s latest comments about protecting home buyers’ legitimate rights indicates that some existing policies may have hurt home buyers’ lawful rights,” said Yan. “There is a possibility that the authority may adjust some inappropriate policies.”
“To protect the stability in the housing market and support reasonable housing demand, related financial resources have to catch up,” said Li.
“Lending to first-time home buyers and those who have real home demand is likely to pick up, waiting time for mortgage loans could be shortened and home mortgage rates are unlikely to rise further in the coming months,” said Li.
“Home mortgage rates in Guangzhou have started to decline after rising for months, which is a signal,” Li said. “The decline in home sales in some top cities could narrow in the fourth quarter.”