Logo of Phnom Penh Post newspaper Phnom Penh Post - RRR cuts to boost liquidity in China’s housing market



RRR cuts to boost liquidity in China’s housing market

Content image - Phnom Penh Post
This Sept 24, 2019 photo shows China’s central bank, the People's Bank of China, headquarters in Beijing. CHINA DAILY/ANN

RRR cuts to boost liquidity in China’s housing market

The People’s Bank of China’s decision to reduce the reserve requirement ratio (RRR), or the amount of cash banks have to set aside as reserves, will ease credit pressure for homebuyers but may not spur huge spikes in home sales, as the broad sentiment that housing is for living instead of for speculation remains unchanged.

The central bank cut the RRR on January 1 for most financial institutions by 0.5 percentage points effective on January 6 to support the development of the real economy and lower social financing costs.

The across-the-board RRR cut on the first day of this year will help increase liquidity and lower social financial costs, with indications that more adjustments in loan and interest rates are in the offing, said E-House China R&D Institute research director Yan Yuejin.

“The RRR cut, the first this year after three instances in 2019, indicates that the monetary environment is shifting from tight to loose, and will be positive for the real estate sector in terms of financing,” said Yan.

Reasonably ample liquidity and social financing will open up more lending avenues for homebuyers in the first quarter, but property developers may continue to see crimped financing conditions, said Zhang Bo, chief analyst of Anjuke, a leading Chinese property portal.

Analysts said the application of the loan prime rate introduced by the central bank will possibly bring down home purchase costs.

The central bank had on December 28 decided to scrap the traditional benchmark lending rate for new loans starting from this year, and made the loan prime rate (LPR) the only benchmark rate for fresh lending starting this year.

Financial institutions and their clients can negotiate a floating rate higher or lower than the benchmark, and for those loans already issued but yet due, new contracts will be signed between banks and borrowers between March and August to shift to the LPR.

“The increased liquidity will likely lead to a cut in the LPR, which means the interest rate for homebuyers will be marked down too,” said Centaline Property Agency Ltd chief analyst Zhang Dawei.

Despite the positive impact for homebuyers, industrial analysts said demand for homes will remain steady, as the annual Central Economic Work Conference has earmarked stabilising land and home prices as well as market expectations as one of the key tasks to ensure steady and health development of the property market this year.

“The key target for the real estate market is to prevent risks, so that the financing environment for the property sector will remain stable in the future,” said Xu Xiaole, chief market analyst with Ke Research Institute, a research organisation under real estate brokerage platform Ke.com.

“It is highly likely that the central government will take steps to ensure adequate liquidity and lower financing costs this year, but such decisions will not be a stimulus for the property market. We have to bear in mind that housing is for living in, and not for speculation,” said E-House (China) Enterprise Holdings Ltd CEO Ding Zuyu.

Xu said the consistent reserve ratio reduction since 2018 is a response to ease the financing difficulties of medium-and small-sized enterprises in particular as China’s economic development is shifting from high growth to quality growth. The RRR cuts will not increase demand for home purchases, he said.

CHINA DAILY/ASIA NEWS NETWORK

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Pursat Ford assembly plant opens

    The Kingdom’s first Ford assembly plant was inaugurated on June 16 in Pursat province amid rising demand for brand-new vehicles among Cambodians. The facility is seen as a game changer for the domestic automobile industry, which could bring a wave of investors seeking to cash

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • $50B infrastructure plan en route

    The government’s upcoming $50 billion,10-year infrastructure master plan will provide tremendous investment opportunities for domestic and foreign entities, transport experts and economists say. Minister of Public Works and Transport Sun Chanthol revealed the plan to Japanese ambassador to Cambodia Masahiro Mikami on June 15. At

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro