China property shares rally on policy support

Shares in Chinese property companies jumped on Monday following a series of supportive policy announcements, as regulators stepped up efforts to curb property sector turmoil weighing on the world’s second-largest economy.

The Hong Kong-listed shares in the service unit of Country Garden rose as much as 14 per cent in the morning session, while its listed parent company and Longfor Properties rose as much as 6 per cent and 7 per cent, respectively. The Hang Seng Mainland Properties index was up 5.4 per cent as of noon in Hong Kong.

Policymakers have accelerated tweaks to stabilise the sagging housing market in recent weeks, including launching bailout funds and special loans to help developers complete unfinished homes, which had sparked a countrywide mortgage boycott.

The People’s Bank of China said on Friday that it would lower the interest rate for housing provident fund loans by 0.15 percentage points for first-time homebuyers starting from October, the first cut in such loans since 2015. Loans with a term of more than five years borrowed from the government’s housing provident fund will be lowered to 3.1 per cent, according to a statement from PBoC.

The Ministry of Finance also on Friday unveiled a rare tax incentive for homebuyers, which allows individuals who buy new homes within one year of selling their previous homes to enjoy a refund on income taxes, a move intended to encourage property purchases.

On Thursday, the banking and insurance regulator and the PBoC relaxed a floor on mortgage rates for some first-time buyers. In some cities, banks can scrap the lower limit of home loan rates and offer cheaper loans to support demand based on their own profitability conditions.

“The three measures . . . will remarkably shore up the housing market momentum in the fourth quarter,” said Yan Yuejin, research director of E-house China Research and Development Institute. “They will help lower the replacement cost on houses and offer burden reliefs for homebuyers.”

But investors have lost confidence in the financial health of Chinese developers, who have defaulted on both dollar and renminbi repayment obligations. After defaulting on its debt last year, the world’s most indebted real estate developer Evergrande pledged to restart all stalled projects by the end of September.

While policymakers have increased support for homebuyers, a lack of clarity on future measures for real estate companies has exacerbated uncertainty in the market.

Last week, the Hong Kong shares of CIFI Holdings slumped to a record low after the company’s chair predicted “unprecedented” liquidity stress ahead.