Chengdu in southwestern China announced measures to boost financing for property developers and homebuyers alike on Nov 23.
It is urging financial institutions to increase lending limits for developers and homebuyers, and to disburse the loans quickly. Key developers will be allowed to defer repayments or pay lower interest rates.
The Sichuan Province capital’s credit expansion is just one example of how cities are fighting a housing market downturn that threatens a vital revenue source: the sale of land for property development.
These moves come as even major metropolises experience some of the troubles that had been confined to smaller, economically depressed cities.
In the northeast, Tianjin last month instructed real estate companies to limit price cuts on property. Newly built properties must be sold for no less than 15% below the original price reported to the city government, a source familiar with the matter said.
Authorities must be alerted ahead of time to any big discounts.
The Jiangsu Province capital of Nanjing in the country’s east has ordered price-cutting developers to stop disrupting the market, Chinese media report.
At least 20 cities across China have imposed limits on property price cuts since summer.
Housing prices fell across much of China this summer, partly in response to stricter mortgage screening requirements. Five of China’s 70 major cities saw new condo prices fall in May compared with the previous month, according to National Bureau of Statistics data.
That figure soared to 52 in October, making it the worst month since February 2015.
Chengdu, Tianjin and Nanjing are considered “new first-tier” cities, putting them just below the “first-tier” cities of Beijing, Shanghai, Guangzhou and Shenzhen in size and economic importance.
Average condo prices in new first-tier cities started falling in October, by 0.1%. Growth halted even for first-tier cities in September, and prices in Guangzhou and Shenzhen have since begun to drop.
But tougher mortgage requirements are just part of what ails the market. China looks to curb excessive borrowing in the property sector, which has gained global attention with the debt crisis at China Evergrande Group.
Some cash-strapped developers have paid contractors in property instead. These contractors, in a rush to sell it, have helped to drive prices downward.
This worries local governments, which sell land use rights to developers so they can build housing and commercial facilities. Falling condo prices would push down rates for these rights as well.
Some municipalities are now selling off prime land expected to attract strong demand. Beijing auctioned plots about a 20-minute drive from Tiananmen Square in November, and is doing so again this month.
Hangzhou, in Zhejiang Province, also has made more plots available in the city centre.
Worried that a property bubble will exacerbate financial risks in the country, China toughened restrictions on real estate as it reopened the economy from the coronavirus pandemic.
But once leading developers like Evergrande began to suffer, the People’s Bank of China and other authorities urged banks not to stifle property-related financing.
China’s outstanding mortgages grew by ¥348.1 billion in October – a roughly ¥100 billion faster increase than in September, according to the PBOC.
The central bank usually publishes quarterly mortgage figures, and the rare monthly announcement likely was intended to signal a shift in the government’s policies.
Still, the government has maintained quotas on mortgages and other property-related lending that were introduced in January. Some banks have already hit their limit and are turning away new applicants.