China housing

Profits of China’s commercial banks may fall victim a bit to the government’s real estate market support policies, and the banks are showing reluctance to introduce their own rules related to housing lending in the future.

Meanwhile, warnings on credit risk from bank supervisors show that they do not want to see a speculative bubble in the real estate market triggered by a relaxation of lending policies.

The People’s Bank of China (PBoC), the central bank, issued new regulations which are now in force setting interest rates for individual housing loans at 0.7 times of the benchmark interest rate and adjusting the minimum down payment to 20% from 30%, measures meant to stimulate buying in the real estate market.

However, PBoC only determined the floating range, leaving appropriate pricing to the loaning institutions.

The China Banking Regulatory Commission (CBRC) issued an urgent circular restating that preferential interest and down payment policies can only be applied to first-time home buyers, excluding second-home loans and others.
More HERE.
Source: China Stakes.com

Real estate mixed

China’s real estate sector has expanded in terms of investment deals, with $25bn of property transactions in the first half of the year. However it has been mainly driven by domestic investors.

Deals by foreign firms declined by more than two-thirds over the past year.

Investment in Chinese real estate rose 78% in the first six months of the year compared to 2007, according to a report by property services firm DTZ.

However, the number of deals closed by foreign firms has declined substantially in the first six months of 2008 — down by more than 75% over the same period last year.

According to DTZ’s first half market review, a total of 318 major
transactions of $10 million or more were recorded in the first
six months of 2008, amounting to $25 billion. The vast majority involved site purchases for development.
More HERE
Source: Private Equity Real Estate

Shanghai apartments

Shanghahi yesterday slightly changed the rules for housing so that more first-time home buyers can enjoy preferential mortgage policies to boost the local property market.

The Shanghai government said in a statement that a flat in the city’s Inner Ring Road with a total price of less than RMB2.45 million ($358,293) will be defined as normal housing if its floor space is smaller than 140 square meters.

For a normal apartment sitting between the Inner Ring Road and the Outer Ring Road, the price cap will be RMB1.4 million while that outside the Outer Ring Road will have a price limit of RMB980,000.

All so-called normal apartments should be smaller than 140 square meters.

First-time buyers of normal apartments will have their minimum downpayment cut to 20% from 30% and the floor mortgage rates will be lowered to 70% of the central bank’s benchmark rate, down from 85%.

The statement said, ‘The move is aimed at encouraging households to purchase apartments, especially smaller ones to achieve reasonable transaction prices.’
More HERE
Source: China View

Real estate in China

The ongoing downward trend of real estate prices is casting shadow over performance of commercial banks on the Chinese mainland, although this is nowhere near as marked as in the U.S. credit crisis.

Shares of China Merchants Bank slumped more than 27% over the past month, while Industrial and Commercial Bank of China dropped 7% during the same period.

David Cui, head of China equity research & strategy of Merrill Lynch, was quoted by China Daily as saying: ‘We strongly urge investors to avoid the financial and property sectors.’

So far, bank profitability has been largely locked in by the spread between the lending and deposit rates. The latest reduction in interest rates should make little difference to banks’ earnings, because both the lending and deposit rates were reduced by the same amount.

However, few economists expected the cut of 27 basis points in the lending rate to encourage many more people to borrow.
More HERE.
Source: China View

Real estate in Shanghai

According to a report by Jones Lang LaSalle, a professional services firm specializing in real estate many emerging markets improved their levels of real estate transparency over the past two years, with China achieving the greatest improvement in the Asia-Pacific region,

According to the latest China edition of the Global Real Estate Transparency Index from Jones Lang LaSalle and LaSalle Investment Management, its global real estate investment management subsidiary, China is currently classified as a semi-transparent market, moving up one full level from low transparency.

Denis Ma, head of the research department of Jones Lang LaSalle Beijing said that the index serves as an excellent tool for potential first-time investors in China’s real estate market.

In addition to the differences between the three tiers of cities on the mainland, Hong Kong is one of the world’s most transparent real estate markets, Taiwan has a slightly higher level of semi-transparency and Macao has low transparency below mainland first-tier cities but slightly higher than second- and third-tier cities.

China’s different tiers of cities. Previous China ratings reflected only first-tier cities (constant since 1999), so the marked improvement is significant for China, which has moved to a higher level than India for the first time.

Based on the findings, the report said there are four key reasons for China’s improvement:
1) Globalization, a major force behind real estate transparency, with increasing capital and companies in China expediting the requirement for accurate market information and adoption of global practices;
2)Openness of real estate’s direct correlation to the growing volume of investment transactions;
3)Increasing number of public listings by property developers and more market information through annual reports; and
4)Central government policies and more publicly available information through the China Real Estate Intelligence Services (CREIS).

Much more HERE.
Source: China Daily