But don't expect agressive policy easing anytime soon.
According to Barclays, the PBoC has urged banks to prioritise housing loan demand to support the property market.
While we look for more supportive measures, we do not expect aggressive policy easing and we envisage a gradual deflating of China’s property bubble.
More proactive actions are taken by the government to support growth and prevent financial crisis. The PBoC held a special meeting on ‘improving housing financial services’ with 15 major banks, including the ‘big five’, on 12 May, hosted by Deputy Governor Liu Shiyu.
Subsequent to the meeting, five brief guidelines were posted on the PBoC’s website on the afternoon of 13 May. Specifically, the PBoC asked banks to: 1) prioritise meeting loan demand from first-time home buyers in credit allocation; 2) price mortgage interest rates ‘reasonably’; 3) quicken the loan approval time for qualified home-buyers; 4) strengthen risk monitoring and management; and 5) proactively respond to the media on topical issues.
Our equity research property team believes these guidelines, if followed by banks, will support home sales. This, in turn, should help to sustain developer investment and construction activity levels, which supports our base case of a gradual deflating of China’s property bubble in 2014-15, and our 7.2% GDP growth forecast. This easing in loan quotas and lower mortgage rates, if implemented, should effectively boost homebuyer sentiment.
Our property team also believes that real housing demand is not as bad as suggested by official sales YTD, given a prevailing wait-and-see mode among homebuyers. They think a degree of price compromise by developers could trigger the release of pent-up demand.
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