China's Real Estate Market Responds to Stimulus Measures... Loans and Transactions 'Stir'

As Chinese authorities continue to roll out real estate stimulus measures, the market is responding. Real estate mortgage loans are increasing, and actual transactions are recovering, especially in first-tier cities.

According to the People's Bank of China, the country's central bank, new yuan loans reached 1.36 trillion yuan (approximately 247.23 trillion KRW) last month. This is an increase of 110 billion yuan compared to the same period last year and exceeds market expectations of 1.2 trillion yuan. Compared to a month ago (July, 345.9 billion yuan), it has nearly quadrupled. Based on cumulative figures from January to August, loans increased by 17.44 trillion yuan, which is 1.76 trillion yuan more than the same period last year.

[Image source=Yonhap News]

Looking at the details, household loans increased by 392.2 billion yuan, of which short-term loans rose by 232 billion yuan. Medium- to long-term loans linked to housing mortgages increased by 160.2 billion yuan. Corporate (institutional) loans jumped by 948.8 billion yuan. The money supply M2 grew by 10.6% year-on-year in August.

Following recent easing of loan regulations, reductions in mortgage interest rates, and adjustments to the initial down payment (shoufu) ratio for home purchases as part of real estate normalization measures, transactions are also recovering. According to Zhongyuan Real Estate, the number of second-hand home sales in Beijing during the first weekend of September exceeded 2,800 units, which is double the average weekend transaction volume in August.

Tang Xiaolin, an analyst at Dongfang Jincheng, explained, "The real estate market is expected to stabilize and show growth in the fourth quarter. At the same time, as each region effectively implements and optimizes policies, adjustments will be made to promote a virtuous cycle in the industry."

However, it is still premature to be optimistic about a full market recovery. Bloomberg reported, "Although new medium- to long-term household loans improved compared to the previous month, they have not yet fully recovered compared to a year ago. Additionally, the improvement in M2 largely depends on the issuance of special bonds by local governments."