Beijing has reportedly moved to shore up the country’s ailing real estate sector, sending property stocks soaring.
According to multiple reports, including the Financial Times and Reuters, the People’s Bank of China and the China Banking and Insurance Regulatory Commission have written to financial institutions outlining 16 specific steps intended to support the sector.
These are understood to include allowing real estate firms to defer repayment of some loans, while trust companies were instructed to provide financing on projects such as rental housing construction and for mergers and acquisitions, Reuters noted.
Most importantly, a looming end-of-year deadline for lenders to cap their ratios of property sector loans has been extended for an as-yet unspecified time.
According to the FT, the ratio of outstanding property loans to total loans at big banks still needs to be capped at 40%, and outstanding mortgages at 32.5%. But the 31 December deadline has been scrapped, with no new timeframe yet confirmed.
Liam Bailey, global head of research at Knight Frank, said the looming deadline had “starved the sector of liquidity”.
The sector rallied on the news, with Hong Kong-listed Country Garden Holdings – the country’s biggest developer – adding around 45% and Dexin China Holdings rocketing 110%. The Hang Seng Mainland Properties Index jumped 13.5% to close at a two-month high.
China’s red-hot property sector was for a long time one of the country’s main drivers of economic growth.
But the sector slowed sharply this year after the government looking to curb excessive borrowing, triggering a slew of sales, price falls and bond defaults. Much housing construction has also been halted.
