Experts: Rate cuts won't aid realty sector

Updated: 2014-06-11 07:01

By Hu Yuanyuan (China Daily)

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Experts: Rate cuts won't aid realty sector

A salesman introduces a housing project to visitors at the Suzhou Property Exhibition last month. The central bank's reserve requirement ratios cut on Monday dashed the hopes of some property developers for a broad-based credit easing this month. Wang Jiankang / For China Daily

The central bank's targeted reductions in banks' reserve requirement ratios won't revive the property sector, making it likely that developers will have to offer more aggressive price cuts to raise cash, industry analysts said.

The People's Bank of China on Monday announced a cut in the ratio by half a percentage point, but only for banks whose new loans to the farming sector or micro-sized and small enterprises exceeded half of their total new lending in 2013.

"The aim is to channel credit to the rural sector and small firms. That move dashed the hopes of some property developers for a broad-based credit easing this month, increasing the probability that more developers will cut prices," said Zhang Dawei, director of market research department at Centaline Property Agency Ltd.

Some extra money might flow into the real estate market, but not enough to make a difference, Zhang added.

According to Chang Jian, China economist with Barclays Plc, the PBOC has resisted calls for an across-the-board reserve requirement ratio cut, because it believes that liquidity in the banking system is ample, and it doesn't want to add further leverage to the economy.

"Cutting benchmark interest rates now could revive the property sector, which is not what policymakers want to see just yet," said Chang. "We understand the central bank's reluctance, but we believe more monetary easing is unavoidable, given that the economy remains fragile amid a property market correction."

Guan Yanli, marketing director of Victoria Mansion, a luxury project in Dalian, Liaoning province, said the target policy easing so far has had no impact on the real estate sector.

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