|
|
A man examines property models at a housing sales center in Hangzhou, capital of Zhejiang province. [Photo/China Daily] |
The People's Bank of China's decision to cut the reserve requirement ratio and the benchmarkinterest rates will encourage more homebuyers to buy bigger, newer homes and help developersreduce inventories in the first-and-second-tier cities, sources said on Wednesday.
"The reduction in the benchmark interest rates and the amount of cash that banks need to hold asreserves will have a significant impact on the property market. The cumulative decrease ininterest rates, and subsequently mortgage rates, will reduce financing costs and the downpayment requirements. The RRR reduction will make more financing available for homepurchasers," said a research note by Savills East China, a unit of global property companySavills Plc.
Most experts, however, are of the view that the central bank moves have made it easier forpeople to purchase homes, especially the lower income households.
Zhang Qingmei, a 29-year-old sales manager in Beijing, said she would be able to buy her firstapartment in the city after the rate cuts.
The new rates will entail cost savings of about 150,000 yuan ($23,437) based on her plan ofborrowing 2.67 million yuan and repaying the same in equated installments spread over 30years.
The interest rate cut, which now lowers the benchmark rate to 5.1 percent, will also enable her topay less than what was based on the 5.4 percent benchmark rate every year.
"A client planned to buy a two-bedroom apartment last month. He is thinking of a three-bedroomone because the financing costs are lower. He is going to borrow 800,000 yuan more than whathe planned last month," said Shen Guang, an account manager with Shanghai Bank.
The interest rate cuts may boost sales prospects for developers in the fourth quarter, which isoften the peak season for property transactions and the time when developers launch newprojects and offer more discounts, said experts.
Zhang Hongwei, chief analyst of Tospur Real Estate Consultancy, said: "We estimate that homeprices may grow in Shanghai, Beijing and other cities and also in lower-tier cities with fast-growing populations, such as Nanjing and Suzhou. The spurt may not be that obvious in otherlower-tier cities due to the existing huge inventories."
For developers, the RRR cut will have a positive impact on liquidity and funding costs, along withbetter access to domestic bond markets.
The RRR cuts means an estimated 700 billion yuan of liquidity could be released immediately,according to Wang Tao, chief economist in China at Swiss financial services firm UBS AG.
Read More : www.bigchinabiz.com