[Hong Kong 31st Archyde.com]–The outlook for the Chinese real estate industry does not improve at all. The central government has come up with a tactic, but industry insiders say funding remains difficult and many local governments are reluctant to deregulate.
The Chinese government has tightened regulations to curb overheating in the real estate market. However, the world market is shaken by the default (default) problem of the Evergrande Group of China. It became a risk to the Chinese economy and changed to a policy of supporting the industry.
Under this policy, the People’s Bank of China (Central Bank) has stated that financial institutions need to be cautiously controlled to meet the “reasonable” funding needs of the real estate sector.
However, executives from five real estate developers in the top 50 domestic sales told Archyde.com that they mightn’t get new loans from banks. Currently, the only way to proceed with the construction work of a new project is to generate declining sales.
Ryuko Group explained to investors this month that bank credit has shrunk since January and that more than 10 billion yuan ($ 1.6 billion) of approved loans have not yet been disbursed. Archyde.com confirmed the related memo.
According to an executive at a state-owned bank, the bank will accelerate mortgage approvals, but should be cautious when dealing with private real estate developers.
“The negative news that developers can’t pay is a warning. For now, we’re limiting our business to state-owned developers,” he said.
Real estate investment in January-February turned to an increase of 3.7% year-on-year due to some deregulation. However, the market continued to be sluggish, with new construction starts down 12.2% and real estate sales down 9.6% on a floor area basis.
“The inconsistency in mitigation measures between the central and local governments also undermines expectations for an early recovery,” said the chief financial officer of a developer struggling to repay foreign currency debt. He pointed out that the policies are different and the effectiveness is low.
Earlier this year, the central government developed a new national policy on how developers handle pre-order funds. Pre-order sales must be placed in a special deposit account. The new policy aimed to remedy the overly strict withdrawals from deposit accounts in some rural areas.
However, the amount that must be placed in the deposit account is at the discretion of the region. According to developers, local governments remain cautious.
Analysts are struggling to determine how much action will be taken by some local governments without violating the central government’s guideline that housing is not for speculation. I pointed out that I mightn’t get it.
(Clare Jim reporter)
