November 24, 2017 / 11:17 AM / a year ago

Chinese bankers, property developers downbeat on 2018 credit conditions

BEIJING/HONG KONG (Reuters) - Most Chinese bankers and property developers at a recent closed-door meeting expect growth in credit to real estate firms will taper off next year, said two sources who attended the gathering, amid a government clampdown on inflated home prices.

A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration

Funding channels for developers have shrunk as regulators make it tougher for real estate companies to raise money as Beijing aims to reduce sources of liquidity that has helped spur home prices to historic highs, analysts say.

In a survey of attendees at the meeting last week, 37.5 percent of respondents said credit provided to the real estate sector will expand at a slower rate next year, while 25 percent said loans will fall year-on-year, one of the sources said, declining to be identified due to the sensitivity of the matter.

None of the respondents expected a faster pace of credit growth, while the remaining 37.5 percent said the financial situation of developers will face uncertainties.

Most of the meeting’s attendees - which included representatives from state lenders Industrial and Commercial Bank of China Ltd (ICBC) (601398.SS)(1398.HK) and China Construction Bank Corp (CCB) (601939.SS)(0939.HK) - expected real estate transaction volumes to fall and home prices to be flat next year as measures to cool the market continue, the source said.

Real estate companies already face huge pressure on the funding side as direct financing in the capital market veers off sharply while interest rates remain high.

The meeting was attended by 51 national financial institutions, which also included Agricultural Bank of China Ltd (ABC) (601288.SS)(1288.HK), Bank of China Ltd (BOC) (601988.SS)(3988.HK) and China Development Bank, one of the sources present at the meeting said.

ICBC, CCB, ABC, BOC and China Development Bank did not immediately comment.

Representatives from more than 20 real estate firms including China Fortune Land Development Co (600340.SS), China Jinmao Holdings Group (0817.HK) and Beijing Capital Land Ltd (2868.HK) were also present, according to the source.

The three property companies declined requests for comment.

Financial institutions said they will scrutinize property firms’ capital adequacy and debt situation more carefully to prevent market adjustment risks, according to the source.

The majority of real estate firms said at the meeting that their demand for funding is still rising as they pursue expansion to maintain growth scale while cash flow from sales in a cooling market ebbs, the source said.

Reporting by Shu Zhang and Clare Jim; Editing by Ryan Woo and Kim Coghill

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