Property market likely to stabilize

Special Report:Global Financial Crisis

BEIJING, Nov. 26 -- The central bank's rare big

interest rate cut will help stabilize the property market but will not ease

property developers' tightened cash flow, experts said.

High rise apartment buildings in Shanghai.(Photo: China Daily)
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The People's Bank of China cut the benchmark interest

rate by 1.08 percentage points on Wednesday, the biggest slash in 11 years,

lowering the one-year lending rate from 6.66 to 5.58 percent.

"The rate cut, which can help cut the cost of

property developers' financing and property buyers' individual mortgage, is

definitely good news to the real estate industry," said Qin Xiaomei, research

chief at CB Richard Ellis' Beijing branch.

The cut means a homebuyer could save as much as 900

yuan each month on a 10-year, one-million yuan mortgage.

"But the rate cut will hardly revitalizes the

sluggish nature of the market," said Qin.

Property prices in China's 70 large and medium-sized

cities rose 1.6 percent year-on-year in October, the lowest growth rate since

2006, according to the National Development and Reform Commission.

James Macdonald, a Savills Research Department senior

manager, agreed.

"The main impact of the rate cut will be to help

stabilize the market by supporting the economy," said Macdonald. "While

individuals will take the interest rate cut into account, their main

consideration will still be the overall health of the property market and

whether they believe property prices will continue to fall or not."

The lending rate for real estate firms also dropped,

but the question is whether they can get loans from the banks at all now, said

Qin.

Rising risk in the property sector mean most banks

are more prudent with loans to real estate firms.

"Bad loans from property developers may see a big

jump after the Spring Festival," said a manager with Industrial and Commercial

Bank of China, the country's largest lender.

The tightened cash flow has already prompted many

real estate firms to sell their projects at assets and equity exchanges

Over 60 projects have been transferred in the equity

exchanges in Beijing, Tianjin Shanghai and Chongqin since September, according

to the four equity exchanges' own statistics.

"The market may warm up in the second half of 2009 or

the first half of 2010, but that still depends on the recovery of the global

market," said Macdonald.

(Source: China Daily)