Lending curbs by banks to cool down fiery property mart
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Meanwhile, some economists expect the government to raise interest rates in the second half of 2010 to further slow lending growth, but that move may now be put into action in the first two quarters.
"I expect interest rates will be raised by the second quarter in order to control the overheated market," said David Chen, senior director of residential project marketing with CBRE (CB Richard Ellis) China, a property consultancy.
An interest-rate hike will surely bolster uncertainty in the market, said Chen. A direct result of that increase will be shrinking transaction volume, he predicted.
The People's Bank of China lifted the bank reserve ratio by 50 basis points on Jan 18. The move sent a clear signal that the government is serious about restraining bank lending.
"This year the central government has allocated 7.6 trillion yuan for loans, a drop of 20.6 percent from 9.57 trillion yuan in 2009. This means less money will be put into the housing market," said Chen.
"But this won't necessarily mean housing prices will experience a sharp drop," Chen noted.
Statistics show that a total of 26 million sq m of real estate was traded in Shanghai last year, but that number may drop to 18 million sq m this year, down 30.77 percent, he said.
"Frequent price fluctuations and a mild 10 percent price rise are foreseeable in Shanghai's housing market this year," he added.
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