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          Shanghai banks lower mortgage interest rates

          By Wang Ying | China Daily | Updated: 2012-02-01 07:52

          SHANGHAI - Several Chinese banks in Shanghai are lowering their interest rates on mortgages for first-home purchases, and some foreign-funded banks are also offering discounts, according to a report in the China Business News on Tuesday.

          "Rumor has it that major State-owned banks have started to offer benchmark interest rates for a first-home purchase, while some smaller commercial banks and foreign-funded commercial banks are offering a 5-percent discount compared with the benchmark interest rate," said Lu Qilin, research director at Shanghai Deovolente Realty Co, a Shanghai-based real estate agency.

          "But my colleagues who supervise housing loans cannot confirm that news," he added.

          "There has been an unwritten rule that loans are usually easier to obtain at the beginning of the year, but that it becomes harder around the year-end period," said Zhu Pingping, an analyst at Shanghai Sinyi Realty Agency and Consulting Co Ltd.

          First-time homebuyers were only able to apply for a mortgage interest rate at 10 percent above the benchmark level last year because of the credit crunch and a State-backed campaign to deflate the property bubble.

          Analysts expect the credit policy for first-time homebuyers will return to the benchmark level or even lower this year. That's after housing authorities stressed that reasonable housing demand should be well protected.

          Jiang Weixin, minister of housing and urban-rural development, said earlier the government will adopt different credit and tax policies for varying property purchases, and the credit policy will make first-home purchases a priority.

          However, the lowered rate should not be interpreted as a loosened property policy, said analysts. Instead, it is a means of carrying out the central government's call to ease inelastic demand.

          According to Zhu, it's unlikely that the mortgage rate will be 15 percent lower than the benchmark interest rate for first-time homebuyers.

          The central government will solidify the outcome of tightening property policies, strictly maintain and gradually improve the policies to restrict speculative housing demand, and return the house prices to a reasonable level, said Premier Wen Jiabao during a State Council meeting on Tuesday.

          Furthermore, the government will take effective measures to increase the supply of apartments, and guarantee the construction and management of government-subsidized housing projects.

          Shanghai is not unique: many local commercial banks in Yantai, Shandong province - including the Agricultural Bank of China Ltd, Bank of China Ltd and Hua Xia Bank Co Ltd - have lowered the mortgage rate for first-time homebuyers from 10 percent above the benchmark interest rate to 5 percent above, the Qilu Evening newspaper reported on Tuesday.

          Some foreign-funded banks have already started to offer first-time homebuyers a 10-percent discount on their mortgage rate, according to a report in the Chongqing Economic Times on Monday.

          Chen Guang, an analyst with Century 21 China, a unit of Century 21 Real Estate LLC, said that despite strong calls for a favorable interest rate for a family's first home purchase in Beijing, the chances of that happening are slim, especially before the opening of two policy formulation sessions of the lawmakers and political advisers, scheduled to be held in March. "The mortgage rate cut is meant to ease the inelastic demand as China's urbanization process is far from being completed. Different demand should be handled with different policies," said Huang Zhijian, executive director of the Uwin Real Estate Research Center in Shanghai.

          During the Chinese Lunar New Year holiday, only 4,400 sq m of gross floor area residential space were traded in Shanghai. That's the lowest figure recorded in the city over the same period in the past seven years, according to Uwin's research.

          Hu Yuanyuan in Beijing contributed to this story.

          China Daily

          (China Daily 02/01/2012 page15)

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