Looser mortgage rules seen boosting China's sluggish property market
First-time buyers redefined as those who have paid off mortgage loans
PUBLISHED : Wednesday, 01 October, 2014
The People's Bank of China and China Banking Regulatory Commission yesterday announced a major loosening of the mortgage rules for the mainland property market, which is expected to give a boost to the sluggish sector.
Economists see the slowing property market as the biggest risk facing the world's second-largest economy, with international ratings agency Moody's warning of further downward price pressure on mainland residential properties.
Wang Tao, an economist with UBS Securities, described the moves as "the biggest step in easing controls on the property market" this year.
Yesterday's announcement redefined first-time buyers and lowered the preferential mortgage rate for them.
Those who have fully repaid an outstanding mortgage loan will now be considered first-time home buyers. Thus, they only need to satisfy a 30 per cent down payment, as opposed to 60 per cent. They will also receive a preferential interest rate as low as 30 per cent below benchmark lending rates, against a 15 per cent discount previously.
Households that own two or more homes and have paid off their mortgages will be allowed to obtain loans to buy another property at appropriate down payment levels and interest rates, according to their credit profile. Previously, mainlanders who owned two or more homes were not allowed loans to buy more.
"This is a big relaxation. It will give a stimulus to the demand for mass and upmarket properties," said Alan Jin, a property analyst at Mizuho Securities. "It is probably the first major relaxation targeted at the property sector since the central bank announced tightened lending policies in 2010."....................................................
http://www.scmp.com/property/hong-kong-c...s-sluggish
Chinese banks relax mortgage rules
DOW JONES OCTOBER 10, 2014 9:30AM
BEIJING-China’s two biggest banks eased mortgage rules on Thursday and will offer lower lending rates for first-time homebuyers, as the government moves to reinvigorate its real-estate sector.
Property prices have fallen for five months in a row, marking a downturn that has become a drag on the world’s No. 2 economy. Beijing has directed banks to make mortgages cheaper, but experts said it wasn’t clear that the banks would follow through on some of their more ambitious offers on a large scale, at the expense of profitability
Industrial & Commercial Bank of China Ltd. , the biggest Chinese lender by assets, and China Construction Bank Corp. , the second-largest, will both allow home owners with no mortgage debt to purchase a second home at the more attractive terms typically offered to first-time home buyers.
They also pledged to offer first-time home buyers discounts that would lower their mortgage rates by as much as nearly two percentage points from the current benchmark of 6.55 per cent.
ICBC, which disclosed the new terms to its branches in a notice reviewed by The Wall Street Journal, also said it would offer owners of two or more homes a lower down-payment requirement, of as little as 30 per cent of the home price, compared with the usual 60 per cent, if they cleared their mortgage balances. An ICBC press representative declined to comment.
CCB, which unveiled new guidelines in a news release, didn’t respond to requests for comment. China’s other two big state-owned banks -- Bank of China Ltd. and Agricultural Bank of China Ltd. -- said they didn’t have an immediate comment.
China’s central bank last week ordered lenders to offer more attractive terms for home buyers. Policy makers are seeking ways to shore up property prices without resorting to large-scale government spending, for fear that would hamper efforts to reduce the economy’s reliance on projects such as infrastructure for growth. Broad interest-rate cuts, another potential tactic, carry the risk of boosting debt levels, potentially harming banks in the future.
Average prices for new homes fell 0.9 per cent in September from August, a faster decline than the 0.6 per cent drop in August, according to China Real Estate Index System, a data provider.
Real-estate agents say that since the central bank issued the order, buyers have been waiting for banks to specify their terms.
"The move has boosted the confidence of homebuyers and property developers as it shows that Beijing wants to save the market, but we’re still waiting for the lenders to change their lending policies,” said Zhang Shihua, a property agent selling villas in the northeastern Chinese city of Shenyang.
Experts said it wasn’t likely that banks would offer the full discounted mortgage rate to many customers. The full discount would result in a mortgage rate of about 4.6 per cent, compared with the benchmark five-year bank deposit rate of 4.75 per cent. That would mean banks were essentially lending at a loss.
“It’s very unlikely that the banks could in practice offer as much as a 30 per cent discount given the high funding costs nowadays,” said Lian Ping, the chief economist of China’s state-run Bank of Communications Co. Ltd..
Before the central bank’s new rules were issued, the minimum down-payment ratio stood at 30 per cent for first-time home buyers and at 60 per cent for second-home buyers. Beijing implemented the requirements in late 2010 to prevent speculators from buying multiple homes, driving housing prices too high for many ordinary consumers to afford.
Under the new rules from the two banks, buyers who have one apartment and have paid off their mortgages can be considered first-time home buyers, qualifying them for lower down payments and interest rates on a second home. ICBC’s rules go a step further, potentially making the better terms available to owners of more than two homes. CCB’s notice didn’t mention a similar policy.
Analysts said the new mortgage rules are expected to boost demand from first-time buyers as well as people seeking to move into a better home, but that the shift isn’t likely to reverse the decline in the market. Too many homes have been built, given current levels of demand, they say.
AMP eyes push into Chinese retail
BEN WILMOT THE AUSTRALIAN OCTOBER 11, 2014 12:00AM
INVESTMENT heavyweight AMP Capital has unveiled ambitions of joining the ranks of international investors in China’s retail property sector with the group seeking a joint venture partner to enter the market.
China is seeing a boom in shopping centre construction and AMP hopes to use its retail expertise to find assets where it can boost returns.
Savills head of research, China, James Macdonald, said China’s mall market faced a lot of new supply, slowing retail sales growth and rising competition from e-commerce businesses.
But he said foreign groups with management expertise were sought-after partners. “That will be a key differentiator,” he said.
AMP Capital has long chased a greater exposure to Asian property markets and has built up a substantial operation in Singapore, where it co-manages a listed real estate investment trust, and has also pursued commercial real estate debt deals in Japan.
Now it is looking to join the ranks of international retailer Walmart, which this year shifted into direct property deals after almost two decades in China, and Australian rival Macquarie Group, which has two ventures in the Chinese retail market.
AMP Capital Asian property head Simon Vinson told Bloomberg the group was after non-performing assets in good catchment areas with limited effective competition.
The group may set up ventures with Chinese shopping centre owners, and may start by providing property advice to mainland mall developers. It has already been advising one of China’s largest shopping centre owners.
AMP Capital may also acquire or partner with companies with interests in Chinese retail assets. “The China retail sector is a very attractive long-term investment play for global institutional clients,” Mr Vinson said.
While senior executives said foreign groups had limited penetration into the Chinese mall market, as there was so much willing domestic capital, some foreign groups were bringing skills into ventures. They cautioned that prices were uncertain due to slowing spending growth and more supply hitting rents.
Some long-term players have made a success of the market, including Singapore’s CapitaLand and Hong Kong-based players like Sun Hung Kai Properties.
Macquarie Group struck a partnership with Dalian Wanda Group, China’s biggest property developer, in 2006 and the fund they run controls more than $1 billion of centres. Macquarie also set up a separate China shopping centre venture three years ago that is aiming to build a portfolio.
Agile Property got bank loans means up lorry already.
Broke convenants on change of Chairman.
One bank call back, the rest will join in.
http://hkm.appledaily.com/detail.php?gui...e=20141011
雅居樂主席被監視居住 妻子及胞弟暫代職務 下周復牌
【本報訊】雅居樂（3383）至今已停牌5日，市場盛傳主席陳卓林被內地當局帶走調查，行蹤未明。公司昨晚深夜發出通告，指獲陳卓林妻子通知，陳卓林原來早在9月30日起、被昆明市人民檢察院執行「指定居所居住」措施，惟沒有披露具體原因。雅居樂因眾多不明朗消息，導致原本進行中的供股大計告吹，由於公司一筆4.75億美元的過渡貸款，即將在今年12月到期，如今供股觸礁，令公司財務即時亮起了紅燈。
記者：吳綺慧 吳永強
■陳卓林被查，其妻陸倩芳將代表丈夫掌管雅居樂的日常營運。 資料圖片
雅居樂將在下周一復牌。鑑於陳卓林已被「監視居住」，公司宣佈調任兩名非執行董事，包括陳卓林妻子陸倩芳、及弟弟陳卓賢，二人分別擔任聯席主席及聯席總裁，以協助管理公司日常營運。陳卓林仍會維持其主席兼總裁的身份。雅居樂強調，截至公告發出日期止，沒有任何資料顯示公司有資金或資產流失情況，有信心業務不會受「監視居住」措施影響。
供股計劃告吹 財務響警號
昨日有關陳卓林的傳言繼續滿天飛，有傳他被內地當局調查，或與近日廣州市官員下馬有關。
受種種不利消息打擊，加上標普把公司列入「負面」觀察名單，雅居樂昨日多隻債券全線急跌，有債券息率急升至近15厘，為2012年以來最低水平。有基金經理表示，雅居樂取消供股屬非常不利訊號：「反映問題唔係咁簡單，包銷商擔心有機會要為供股『上身』，所以打退堂鼓。」
雅居樂是在9月底公佈以「5供1」基準供股，集資27億元。公司昨日早上發出公告，指未能按原定時間表進行供股，但會留意事態發展，盡快討論可行的集資方案。
據悉，雅居樂原本計劃把供股所得，用於償還一筆4.75億美元（約37億港元）的過渡貸款。據instanter.com資料顯示，該筆貸款是在今年4月簽訂，為期8個月，經辦銀行為恒生、滙豐及渣打，該筆貸款即將在12月到期。如今供股大計拉倒，雅居樂如何應付迫近眉睫的債務，頓成市場焦點。
截至今年6月底止，雅居樂一年內須償還的銀行貸款達147億元（人民幣．下同），其手頭沒受限制的現金有76億元。
有基金經理表示，雅居樂最終能否渡過難關，將很視乎陳卓林最後是否可「平安無事」，並獲銀行支持，盡快進行融資。
星展唯高達昨日向客戶發出備忘，指傳聞稱陳卓林正在某處進行調查，惟無人知道調查的原因，以及會調查多久。該行指，最壞的情況下雅居樂可全數出售其手上存貨，估計可套現約140億元，但如公司要走到這一步，該行會建議投資者遠離這隻股票，因其財務狀況已被大幅削弱。
Another one bite the dust!!!
Easier reading for our non chinese reading buddies/kakis
Agile Property Says Chinese Prosecutors Have Chairman in Custody
Updated Oct. 10, 2014 11:52 p.m. ET
SHANGHAI—Chinese real-estate developer Agile Property Holdings Ltd. 3383.HK -1.65% said Chinese prosecutors have its chairman in custody, dealing another blow to the firm which is struggling with refinancing risks amid a nationwide housing downturn.
Chen Zhuo Lin “was required to stay at a designated residence since the evening of September 30,” by the Kunming City People’s Procuratorate of the People’s Republic of China, Agile said in a statement late Friday. The Kunming City People’s Procuratorate is the local agency in southwest China’s Yunnan province responsible for prosecution.
The procuratorate couldn’t be reached for comment.
The statement said company directors don’t know further details and aren’t aware of any missing funds or improper use of assets.
The board has designated Chan Cheuk Yin and Sin Fong Luk, Mr. Chen’s wife, as acting co-chairpersons, noting their experience and familiarity with the firm’s operations.
The Guangzhou-based property developer, which has projects in at least 17 Chinese cities, shelved plans Friday for a 2.75 billion Hong Kong dollar (US$348 million) rights issue, driving many analysts to question the firm’s ability to repay some of its loans. Shares of the firm have been suspended from trading since Oct. 3. They will resume trading on Oct. 13, the statement said.
Agile also said that it has reviewed its loan facilities and that none of the provisions have been breached following the trading suspension.
Copy from WSJ
Fears of Chinese property crash are overblown
PETER CAI BUSINESS SPECTATOR OCTOBER 15, 2014 4:10PM
AT the IMF and World Bank meetings in Washington last week, the chief economist of the People’s Bank of China identified the country’s property sector, which accounts for 20 per cent of total investment, as the main downside risk for the Chinese economy.
Ma Jun, a former Deutsche Bank economist, told a panel that the real estate sector, state-owned enterprises and local governments were all over-leveraged and that exposure had been increasing at a rapid pace over the past few years. This rising level of leverage is the key reason for Beijing’s reluctance to open its wallet to prop up a rapidly-slowing economy.
Heightened fear about the Chinese property sector has galvanised analysts and commentators from the start of the year and opinions are polarised. Some are predicting a spectacular asset bubble burst similar to what occurred in Japan and the US, while others are retaining their faith in Beijing’s ability to manage the downturn.
Dr Li-Gang Liu, chief economist for Greater China at the ANZ, takes a close look at the debate in a recent policy brief prepared for Peterson Institute for International Economics, a prominent free market think tank in Washington. The ANZ economist’s paper looks at the history of the sector, identifies the challenges it faces and notes the strong fundamentals that support the industry.
So let’s start with the state of the sector, which is a key growth engine for the world’s second largest economy. New home sales for all Chinese cities, big and small, dropped sharply in the first half of the year and the inventory of unsold new homes has also risen quite dramatically since the fourth quarter of 2013.
It is estimated that it would take anywhere between 14 and 24 months to sell off all existing inventory in Chinese cities. This is in sharp contrast to last year’s buoyant sales and rapid prices increase. The fears are that this could be the inflection point, triggering a wave defaults that could bring down the country’s economy.
However, Liu believes the “fears about the China’s property sector are likely to be overblown,” and he explains why in his detailed policy brief.
Despite the dramatic expansion of China’s real estate sector, it is still a relative young sector. Widespread private ownership of property didn’t really take off until 1998, and, as a result, mortgages outstanding are only slightly more than 10 trillion yuan or $US1.9 trillion. This represents only 14 per cent of total bank loans in 2013.
Unlike the subprime mortgage crisis in the US, the average quality of Chinese mortgages is high, in fact, it has the lowest default rate among all types of loans. It’s not hard to see why, home buyers need to make down payments of at least 30 per cent before qualifying for a loan. In megacities like Beijing and Shanghai, that down payment requirement is 40 per cent.
So in short, Chinese households are much less leveraged than their peers elsewhere, especially when compared with the US. Due to the lack of alternative investment options in the country’s underdeveloped financial markets, many households view property as a good store of value. This has helped to lift the country’s savings to a massive 50 per cent of GDP.
One of the strongest fundamentals that will help support the property sector is the ongoing process of urbanisation in China. The State Council, China’s cabinet, estimates that another 200 million people will migrate from the countryside to cities by 2023, twice the number that made the move since 1990. By the start of the next decade, it’s estimated that China will have an urban population of 920 million, which will lift the urbanisation rate to above 65 per cent.
Despite the explosive growth of concrete jungles in China, the country has a surprisingly low urbanisation rate. At present, only 54.5 per cent of the country’s estimated 1.4 billion people live in cities. If we take out all those people who are not officially registered as urban residents according to the country’s Hukou system, the true urbanisation rate could be as low as 35 per cent.
Liu believes China’s urbanisation process will provide strong support for both the property sector and infrastructure investment. It’s estimated that around 40 trillion yuan or $US7.5 trillion will be ploughed into infrastructure over the next two decades.
Though many analysts point to soaring house prices as a sign of an emerging property bubble, Liu counters this argument by noting that the data is skewed by the huge price increases in first-tier cities like Beijing, Shanghai and Guangzhou.
In fact, the average urban house price is only 5,850 yuan per square metre, according to the official statistics. This means that China has a national price-to-income ratio of 6.1, which is towards the lower end of the international norm of between 6 and 8.
We have all heard, read and watched stories about China’s infamous “ghost cities” and many commentators have seized on that as yet another sign that a property asset bubble is emerging. Liu’s paper puts that observation into historical perspective by arguing that demand for property has outstripped supply over the last ten years.
“Demand has outstripped supply by 144.6 million square metres per year in the face of rapid urbanisation, which has driven prices higher,” he says.
“While the latest data may reveal a temporary oversupply, inventory does not appear to be a major issue.”
It is prudent to not to downplay China’s property risk, but at the same time, it is equally useful to establish some basic facts about the property sector before we scare ourselves to death. Tomorrow, China Spectator will look at Liu’s assessment of the downside risks to the industry as well as available policy tools.
Business Spectator
China's Agile shrinks rights issue, says director missing
Slashes new rights issue size to $213 mln from $360 mln
* Founder's family trustee to be new underwriter
* Exec director in charge of Yunnan province projects missing
* New rights issue a vote of confidence - analyst
* Company may see more downgrade pressure - S&P (Adds analyst and S&P comments, background)
By Clare Jim and Umesh Desai
HONG KONG, Oct 16 (Reuters) - Struggling Chinese developer Agile Property Holdings Ltd, whose billionaire founder was detained last month, said one of its executives had disappeared as it announced fresh plans for a life-saving capital increase.
The company, saddled with debt and slumping margins amid China's economic slowdown, said it now planned a rights issue to raise HK$1.65 billion ($213 million), much less than the HK$2.79 billion it proposed to raise in September.
Top Coast Investment Limited, the trustee of the founder's family trust, will underwrite the issue as opposed to HSBC , Standard Chartered and BNP Paribas in the previous plan, it said.
If minority shareholders did not take up any of the offer, Agile said the controlling Chen family and company directors would increase their stake to 68 percent from 64 percent, in what some analysts saw as a sign of confidence in the firm's future.
"We view the rights issue as marginally credit positive, as an equity undertaking instead of a shareholder loan shows a vote of confidence from the management," said Agnes Wong, a Hong Kong-based credit analyst with Nomura.
Agile shares were down 2.2 percent at HK$4.07 by 0410 GMT, their lowest since April 2009, compared with a 0.5 percent fall on the Hang Seng Index. Agile bonds rebounded, with the 2017s now trading at 91.5/93, a four-point recovery.
Chinese developers are under intense pressure due to the slowing real estate industry in the world's second-largest economy, with tight credit and excess supply forcing many to sell stock cheaply to raise cash.
Agile's problems have been exacerbated by the mysterious detention last month of founder and chairman Chen Zhou Lin, whose family wealth of $3.2 billion was ranked 51st in China on the 2014 Hurun Rich list. Agile has not said why Chen was detained.
Those concerns only deepened on Thursday when the $1.8 billion company said an executive director responsible for overseeing projects in Yunnan and Hainan provinces was missing, after Communist Party officials made inquiries about a subsidiary, Tengchong Agile Resort Co. Ltd.
The missing director and officials from the Central Commission for Discipline Inspection contacted Tengchong Agile Resort on Saturday seeking details on its land acquisitions, developments and sales.
Agile said in a statement that neither it nor the missing director's family had received any legal documents from authorities related to any investigation.
It is unclear whether the director was being detained or was on the run, or whether the company was being targeted over any alleged wrongdoing.
Another subsidiary of Agile, Tengchong Agile Property, was fined in May for illegal construction of a golf course on farmland. Tengchong is a county in Yunnan province.
Read more here
CHINA
Expand megacities to spur economy
Failing to expand, improve these urban areas could be disastrous, warn analysts
A strategy that supports the expansion of China's biggest cities, including Shanghai (above), would add US$2 trillion to the country's output in 10 years, according to economist Andy Xie.
Beijing
CHINA needs a new prescription for growth: Cram even more people into the pollution-ridden megacities of Beijing, Shanghai, Guangzhou and Shenzhen. While this may sound like a recipe for disaster, failing to expand and improve these urban areas could be even worse.
That's because the biggest cities drive innovation and specialisation, with easier-to-reach consumers and more cost-efficient public transport systems, according to Yukon Huang, a former World Bank chief in China.
He estimates that Chinese leaders' seven-month-old urbanisation blueprint, which aims to funnel rural migrants to smaller cities, will slice as much as a percentage point off gross domestic product growth annually through the end of 2020.
"China's big cities are actually too small," said Mr Huang, a senior associate at the Carnegie Endowment for International Peace's Asia programme in Washington. "If China wants to grow at 7 per cent for the rest of this decade, it's got to find another one to 1.5 percentage points of productivity from somewhere."
A strategy that supports the biggest cities' expansion would add US$2 trillion to China's output in 10 years - more than India's 2013 GDP - according to Shanghai-based Andy Xie, a former Morgan Stanley chief Asia-Pacific economist.
With a population more than four times that of the US living on roughly the same land mass, China should have big, densely populated urban areas, Mr Xie said. To make that a reality, the megacities need to build up, not out, he added, citing Tokyo and its population of about 37 million as a workable example.
"If you do not focus on big cities with concentrated populations, China will become an ecological catastrophe," he said. "If you pick the wrong model of urbanisation, it sets you back not just for years, it could cap your income level for eternity."
Beijing and Shanghai already have about 20 million people each, while Guangzhou and Shenzhen both top 10 million. Even so, given China's 1.4 billion population, their concentration is low by global standards.
In the US, the largest 10 metropolitan areas account for about 38 per cent of GDP, about double that in China. Echoing Mao-era central planning, China's current urbanisation policy decrees that populations will be "strictly controlled" in metropolises with more than five million people while expansion is allowed in mid-sized cities and encouraged in small ones. The plan will redress unbalanced development that has left megacities overburdened, with deteriorating environments, Vice-Minister of Public Security Huang Ming said at a March briefing.
The edict shows the "persistence of old thinking" even after past attempts to shift people and resources to smaller, less productive cities proved "hugely wasteful", Andrew Batson, an analyst at researcher Gavekal Dragonomics in Beijing, wrote in an August note.
"Planners still seem convinced that big cities are crowded, terrible places whose growth must be controlled," wrote Mr Batson. "In reality, big cities are China's richest and most vibrant places, and restraining their growth does the economy no favours."
Premier Li Keqiang is under increasing pressure to boost the economy, which is headed this year for its slowest expansion since 1990. Growth probably fell to 7.2 per cent in the third quarter from 7.8 per cent a year earlier, according to the median estimate of analysts in a Bloomberg News survey ahead of data scheduled for release on Tuesday.
While Mr Li and his fellow Communist leaders have the chance to shift policy priorities at the fourth plenum that started in Beijing on Monday, any major rethink on urbanisation is unlikely. The conclave will focus on efforts to bolster the rule of law, state media reported in September.
The pace of migration from rural areas to cities, a dynamic hailed by Mr Li as key to the nation's development, is set to slow by a third in the years from 2013 to 2020 compared with the previous seven years, the government forecasts. That's putting pressure on Mr Li to find ways to optimise productivity.
The rapid expansion of China's cities hasn't been accompanied by efficiency gains because of impediments including urban sprawl and inadequate infrastructure, according to Cui Li, a Hong Kong-based economist at Goldman Sachs Group Inc.
Achieving the same efficiencies as US cities, which are modest compared to those in more compact European metropolises, could add one percentage point to annual growth by the end of the decade, she estimates.
An additional 4.2 million people can be added to Guangzhou and 5.3 million to Shenzhen if those cities had the same population density as Seoul, according to a March report by the World Bank and the State Council's Development Research Centre.
Making changes to land use that would spur denser cities could save China US$1.4 trillion from a projected US$5.3 trillion in infrastructure- spending needs during the next 15 years, World Bank chief operating officer Sri Mulyani Indrawati said.
There are signs of progress. A bus rapid-transit system that opened in Guangzhou in 2010 has saved passengers a combined 32 million commuting hours a year and is projected to cut carbon dioxide emissions by 84,000 tonnes in its first decade of operation, the United Nations estimates. In Kunming, capital of south-western Yunnan province, a new district is being developed with a subway system, bus stations and green spaces planned every 300 metres. BLOOMBERG
Govt to relax sales tax on homes: report
Beijing
CHINESE authorities are likely to relax the sales tax on existing homes, the Beijing-based China Securities Journal reported on Monday.
Under the new policy, sales of a second home purchased no less than two years prior will be exempt from a 5 per cent tax on the transaction price, said the daily, citing well-placed sources.
According to the newspaper, think-tanks have proposed the relaxation of sales tax to buoy home sales in industry research reports submitted to government departments.
Currently, the taxable period is five years from date of purchase. The current policy has been in place since early 2011, when the Chinese government adopted a package of policies aimed at curbing the overheated housing market.
The report also said that regulating authorities had concluded that China's housing market is oversupplied based on surveys and research.
Aside from the sales tax, authorities might make more changes on transaction taxes in the future, if necessary, to lower transaction costs and boost home sales, according to the report.
Since the beginning of this year, the Chinese property market has suffered a notable downturn, with falling prices and sluggish sales. Official data showed that out of 70 major Chinese cities, new homes in 68 saw month-on-month price declines in August, compared with 64 in July.
On Sept 30, China unveiled eased mortgage measures for home buyers in a joint announcement by the People's Bank of China, the central bank, and the China Banking Regulatory Commission.
Before the easing of mortgage rules, 41 out of an original 46 cities removed home purchase restrictions amid a cooling market. XINHUA
the ultimate removal of the property measures will be removing 限购 in the first tier city. Starting with SZ first.