Four major banks of China, the second largest economy of the world, are poised to relax lending regulations to help boost the sliding property market of the country, several reports reveal.
Local news sources claim that Chinese government-owned lending giants like the Industrial & Commercial Bank of China Ltd. and the Bank of China Ltd., may be lowering mortgage rates to help first-time home owners. The previous 15 percent discount on home loans will reportedly be increased to 30 percent, according to the Financial Times.
The banks met Monday to discuss potential cut backs on lending restriction as more cities join the slew of those easing curbs to boost the property market of the country. No official announcement has been made though.
"This reported property policy loosening marks the first major relaxation of mortgage lending rules, which should effectively lower both the down payment requirement and mortgage rates for some second home buyers," UBS economists wrote in a report cited by Bloomberg.
"We expect these measures to help ease the property market downturn to an extent, but not to reverse the downtrend or drive through a visible rebound," the experts added.
In the past three years, the Chinese government introduced strict property rules to hold down the rapidly escalating property prices. The regulations included tougher mortgage qualification requirements, higher down payments and caps on property purchases where one person is only allowed to own one property.
But, the results of such stringent curbs were grave. Property sales in the country plummeted by more than 13 percent in just a matter of months and all China was left with abandoned ghost developments.
However, the government is trying to set the buying momentum going now. Several cities are lifting property curbs now with about 40 of the 46 cities that had tightened rules have been easing them off. More recently, Nanjing announced that residents could buy more than one property in the city. Bigger cities like Beijing, Shanghai and Guangzhou yet have to lift some crucial restrictions.
But are these curbs really helping?
According to the latest data by China's National Bureau Statistics, prices fell in 68 of the 70 major cities monitored by the agency by 1.1 percent in August on weak demand. But, the government of China said that these were minor fluctuations and the policies are focused towards long-term goals.
China's shares went up considerably after news of the banks lowering rates and easing curbs hit the web, according to the Economic Times.
However, a report by China Money Network noted that it just might be too late for China to do anything because "China's property market supply has exceeded fundamental demand."
What's your take on the Chinese property market?
