The recent explosion in Chinese real estate is raising expectation of a response from the nation’s banking sector, specifically focusing in on debt purchases and leverage ratios. 2009 has seen sales volume in new and existing floor space sky-rocket, residential prices steadily climb, and property investment rise nearly 20%. For more on this, see the following article from Property Wire.
Residential property prices in China rose by 3.9% in October, according to official figures, with investment in real estate increasing 18.9% in the first ten months of the year.
Property sales growth measured by floor space rose to 48.4% in the first 10 months from 44.8% in the first three quarters of the year.
That translates into an 81.7% surge in October alone from a year earlier, according to China International Capital.
And floor space started in the year to date rose from year earlier levels in October for the first time since the beginning of 2009.
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The year-on-year increase in October was 56%. That matched the September reading, which was the strongest in at least five years.
‘Although property investment dipped a bit in October from the previous two months, growth is still very strong, and the trend is expected to continue, given the figures for sales and new starts,’ said Xing Ziqiang, an economist at China International Capital in Beijing.
‘I think sales and new construction starts are more important figures than investment because they are leading indicators,’ Xing added.
There is still a lot of talk about China’s central bank and banking regulators introducing cooling measures to slow the market.
They might try to limit the use of debt in real estate purchases or reduce leverage ratios.
‘I would think that soon you will see these measures coming out of the central bank and banking regulatory commission,’ said Fang Xinghai, director general of Shanghai’s financial services office.
The China Banking Regulatory Commission said last month that it plans to tighten rules on personal loans to prevent them from being used for speculation. It also wants to reduce leverage at developers that bought land at inflated prices and at large state owned companies that have entered the property market.
There is concern that excessive borrowing by some developers threatens to cause an increase in delinquent debts should prices collapse.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.
