Cooled property market testing govt regulation

Analysts said that at the heart of this round of policy loosening is fine tuning and targeted easing. Across-the-board scrapping of property curbs was never likely, and the pattern derived from measures already taken is that existing curbs can be loosened when property prices drop to a point that causes material damage to local economies.

Another factor contributing to slow home sales, many analysts suggest, is banks' growing reluctance to extend mortgages to home buyers.

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China's major banks have scaled back mortgages since late last year, as the rising cost of deposits and discounts in mortgage rates combined to hurt their margins.

The trend has not gone unnoticed by regulators. During a closed-door meeting in May, Liu Shiyu, the vice-governor of China's central bank, urged banks to expedite mortgage approvals for qualified home buyers.

Yet in what appears to be quiet disobedience to this guidance, there has been no marked increase in mortgage approvals in the months after the meeting and banks are no longer offering discounted mortgage rates.

"Don't expect the ongoing policy tweaks by local authorities in some regions to grow into a full-blown reversal of property curbs across the country," said Qin Hong, director of the policy research center under the Ministry of Housing and Urban-Rural Development.

Qin said that scrapping existing curbs altogether goes against efforts to squeeze out speculation in the property market -- a key component of the government's policy agenda.

The bottom line, she said, is that such policy tweaking must not be abused by local governments as a way to stimulate the property market to ensure short-term economic growth. Any changes made should be designed to bring the country's property sector on a healthier course of development.

"Loosening curbs is not a game-changer in the proper market," said Andy Ma, a CBRE managing director based in Hangzhou. The market fundamentals will remain the same unless land supply problems and the over-reliance on land sales for fiscal revenue are properly addressed, he believes.