One of the big concerns in the world these days is the trajectory of the China’s economy. Specifically, is China head for for a soft or hard landing?Many point to the China’s slowing property market as a key concern on the matter.
However, many experts argue that China has sufficient policy tools to engineer a soft-landing in the economy by bolstering the property market.
Just last week, we learned China’s biggest banks had cut mortgage rates for first-time buyers.
JP Morgan was on the ground in China and noted that some first-time buyers were actually getting lower mortgage rates than advertised. From JP Morgan’s Jing Ulrich:
We heard today from China Overseas Land (COLI) that Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) have just lowered mortgage rates for first-time homebuyers to 10% below the benchmark lending rate. Prior to Chinese New Year, the rate was at a 10% premium, and the premium was removed during Chinese New Year to stimulate sales. During a visit to a China Vanke housing project, we were told that a 15% discount to the benchmark lending rate is possible for first-time buyers. The lowering of mortgage rates in Ningbo serves as another example of a local government following the PBoC’s recent call to support mortgage lending. It has been reported that banks are lowering mortgage rates to first-time homebuyers in Beijing, Shanghai, Shenzhen and other cities.
Although this is positive for China’s property market, it is very anecdotal and represents only one slice of the market. And there are definitely weaknesses in other areas of the market:
In the current climate, high-end developers are experiencing great difficulty and are unlikely to benefit from any degree of policy easing in the near term. In this sense, the downturn in the housing market stands to weigh on corporate earnings for a range of “local champions” in Chinese cities that have become involved in real estate.