Hints that curbs on Chinese property at an end

China has no plans to add to already tight property calming measures although banks will be required to follow strict rules when giving home buyers preferential rates.

Speaking on the sidelines of a meeting of an advisory body to the Chinese parliament, Yan Qingmin, an assistant to the chairman of the China Banking Regulatory Commission, also said that banks must control first mortgages.

Meanwhile, China Overseas Land & Investment, the Hong Kong listed developer controlled by the nation’s construction ministry, plans to set up a real estate fund of $300 million to $500 million as it bets that government measures won’t curb property demand further.

The fund, which will invest in commercial and residential properties in China, may be ready in the first half of the year, Chairman Kong Qingping said in an interview in Beijing.

Kong is betting long term property demand in China, where January home prices rose in all but two of the 70 cities monitored by the state, will outweigh the impact of curbs imposed by a government concerned about an asset bubble.
  Expansion by Chinese developers into smaller cities may hurt their profit margins as land costs climb faster than home prices, according to Credit Suisse Group.

‘Any company that has a nationwide coverage is certainly stronger than those in single cities. They’re emerging markets with low and healthy home prices,’ Kong said.

Cities including Jinan in the north, Nanjing in the east and Kunming in the south have followed the capital Beijing in introducing local curbs on home purchases. The government this year raised down payment requirements for second-home purchases and imposed taxes on residential properties in Shanghai and Chongqing.

China Overseas hasn’t been affected by property curbs imposed by the government yet, Kong said. The measures will help control home prices in the short term, though long-term demand will continue to be strong, he added.
  Vincent Lo, chairman of rival Shui On Land, said that he expects home sales in China will fall sharply This year because of government curbs.

Real Estate Group, the nation’s second biggest developer, said last week the current round of curbs won’t change its bullish outlook in the medium to long term.

Credit Suisse said developers including China Overseas, which expanded heavily into the smaller cities, will be the most affected by the government measures.

The company wants its commercial property to account for 20% of its net income in five years, Kong said. The developer has more than 2 million square meters of commercial property land bank, he added.

China State Construction International Holdings, a sister company, will take part in the government’s call to build more affordable, public housing, including two projects in Chongqing, said Kong, who is also chairman of China State Construction.

The government plans to build 36 million low income housing units in its 12th Five Year Plan. But the plans won’t have a big impact on the private residential market, Kong believes. ‘The return rates of building social housing is low, but it also has low risks,’ Kong said.