China’s Urban Housing Markets Cool Sharply As Borrowing Costs Continue to Rise

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Industry observers say that the launch of real estate tightening policies towards the end of last year as well as a staunching of capital availability has led to a pronounced cooling of China’s urban property markets in 2017.

According to Securities Daily official data indicates that new commercial residential building prices continued to see declines in year-on-year growth across 15 first-tier and “hot spot” second-tier cities in July.

Beijing saw new home prices fall for the second month in a row in July, while second-hand home prices posted their third consecutive month of decline.

In Shanghai new home prices remained stable last month, while second-hand home prices fell for the second consecutive month.

Hu Jinghui, vice-president of B.A. Consulting, said to Securities Daily that the nationwide trend of decline in the property markets of China’s major cities can be imputed to tightening policies that restrict the purchase and sale of housing, as well as lending to consumers or investors by banks.

Transaction levels are now tepid, while housing prices have either fallen slightly or slowed markedly in growth.

According to Centaline Property’s Zhang Dawei, rising capital costs have played a pivotal role in the cooling of real estate markets in leading Chinese cities.

Zhang said to Securities Daily that the cost of funds has seen a marked and continuous increase since the start of 2017, with lending policies shifting from discounts to premiums against the benchmark rate as the government’s property policy controls continue to tighten.

Data from Rong360, based on a survey of a 33 branches of 66 banks in a total of 35 key cities, indicates that the China’s average first-home loan rate was 4.99% in July, equal to 1.02 times the benchmark interest rate.

The July marks a month-on-month  increase of 2.25% and a year-on-year increase of 12.38% compared to the rate of 4.44% in July of 2016.

According to Rong360 only 22 banks in China provided discount rates for property loans in July, as compared to 78 in the preceding month, while amongst first-tier Chinese cities only one bank in Beijing provided discount rates to first home buyers.

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