HONG KONG (Reuters) - Shares in Chinese developers jumped on Thursday on expectations that the government would ease back on measures to cool the housing market because of fears of a real estate crash.
Beijing had brought in policies to deter property speculation as the housing market raced ahead in the last five years, including clamping down on loans to developers, implementing a land appreciation tax and raising interest rates.
With home sales sliding in several parts of the country, and developers forced to slash prices to stay afloat, many analysts have said local governments are quietly easing rules because of fears of a property market crash.
That idea gathered pace with the announcement by the city government of Nanjing on Sept. 27 of measures to “maintain a stable and healthy development” of the real estate market, according to a Citigroup research note issued on Wednesday.
Among the measures, reported in a local newspaper, Nanjing would cut the supply of land for new development, give buyers of mass-market homes a subsidy, allow developers to defer payments for land and stretch construction deadlines.
To deter land speculation, the Chinese government had introduced a rule requiring developers to begin building on land within two years of buying it, or face confiscation. For details of government austerity measures click [nHKG134223].
Average property price inflation in 70 large Chinese cities slowed to 5.3 percent in the year to August from 11.3 percent in the year to January, although prices in major cities such as Shenzhen have plunged by up to 40 percent.
Shares in China Overseas Land Investment (0688.HK) soared close to 9 percent on Thursday. China Resources Land (0291.HK) gained 9.3 percent while Guangzhou R&F Properties (2777.HK) shot up 13.4 percent.
“The Chinese central bank is expected to come forth and announce some measures to support the property market after the sharp slide in prices,” said Castor Pang, strategist with Sun Hung Kai Financial.
“Regional governments have already announced some measures and it looks like the central government will also announce something to shore up the confidence in the market and keep growth rates intact.”
When Beijing upped the ante in a fight against property speculation at the end of last year by ruling that buyers of second homes must pay 40 percent in equity, apartment sales and prices slid in the southern cities of Guangzhou and Shenzhen.
For a graphic on Chinese residential property sales, here
Shares in some Chinese developers are down as much as 80 percent since a peak last November and most trade at discounts of between 60 percent and 85 percent to net asset value.
Because of the market slump, as many as 30 property firms have shelved IPOs planned for this year. Many took on pre-IPO funding from private equity and hedge funds, and will have to repay investors soon if they do not push through market listings.
And thousands more small firms are vulnerable, analysts say, as banks cut their loans to developers by 30 percent in the first half of this year to 399 billion yuan ($58 billion).