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Experts say RRR reduction to help ease property sector pessimism
Last Updated: 2019-09-10 08:36 | China Daily
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The central bank's move to cut the reserve requirement ratio will not become a stimulus for the property market, which is guarded against speculation, but the increased liquidity will help ease the pessimism clouding the market in the rest of the year, said experts.

The People's Bank of China, the country's central bank, announced on Friday a cut in the reserve requirement ratio for financial institutions by 50 basis points from Sept 16 in the latest effort to bolster the economy.

"The target of the decision is clear, which is not for the purpose of stimulating the property market," said Zhang Dawei, chief analyst at Centaline Property Agency Ltd.

Quite a few tightening measures were in place before the RRR cut, and they have served as precautions to prevent capital from flowing into the real estate sector, said Zhang.

More than half of the top 10 Chinese listed property developers failed to achieve their half-year revenue target, which suggested that they have to make more efforts in the second half, and perhaps during the conventional sales season of September and October.

Although a total of 12 real estate developers including China Vanke, Country Garden and Evergrande reported their revenue exceeded 100 billion yuan ($14 billion) in the first half, the majority of the top 10 missed their annual targets.

Among the seven top 10 developers that have announced their annual sales objectives, Poly Real Estate and China Overseas Property are the only two to have achieved their ambition.

According to's report, 10 out of the 25 major Chinese developers achieved more than 50 percent of their annual sales revenue from January to June.

"Developers have clearly shifted their focus from high growth to stable and sustainable development," said Zhang Jian, research director of Shenzhen Fangdd Network Technology Co Ltd, the nation's largest online property trading service platform set up in 2011.

The property market has entered a new phase, which in turn has led to the transition of developers' strategies, therefore, high growth is no longer the only pursuit, and stable growth is the new trend, added Zhang.

Conventionally, real estate developers' first-half sales revenue is not as good as the second half, especially taking into consideration that the annual sales peak is in September and October, according to Duan Yutong, an analyst from Beijing-based property information and technology company Zhuge.

The narrower difference between peak sales months and other months, the tightening policies announced by local governments, and the restrictions on Chinese property companies' offshore fundraising by the central government will increase the difficulties for those companies that have not achieved 45 percent of their whole-year sales in the first six months, added Duan.

The RRR cut could play down the pessimistic outlook for the real estate sector. The increased liquidity will not go directly to the real estate sector, but will to some extent lower the cost of home mortgages, said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.

"The central government's firm stand on houses as places to live instead of tools for speculation has sent a clear signal to the market that all future real estate development should follow the actual market consumption needs," said Yan.

Nevertheless, property developers are confident of achieving their annual targets.

"There is no doubt about the accomplishment (of this year's target)," said Xia Haijun, president of Evergrande Group, at the company's half-year results meeting.

Meanwhile, Cheng Guangyu, vice-president of Country Garden Holdings Co Ltd, expressed his confidence that the company's sales revenue will continue to see year-on-year growth.

Experts expected that property developers will take more active measures to shore up sales, such as offering discounts in the second half.

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Experts say RRR reduction to help ease property sector pessimism
Source:China Daily | 2019-09-10 08:36
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