China Giving Mixed Signals on Property Market
Beijing's recent announcement that it has enough room to ease monetary policy is sending mixed signals about its stance on the property market, says a market watcher who sees an increase in liquidity working against curbs introduced to cool the real estate sector.
"There is a major conflict of signals coming out of the Chinese authorities at the moment," Peter Churchouse, Chairman of property investment firm Portwood Capital, told CNBC on Tuesday.
"On the one hand you've got the central government saying we're going to keep these controls in place, we're going to keep a tight reign on property prices and then on the other hand you see them talking about easing the [banks] reserve ratio requirement," he said.
Churchouse adds that every 50 basis point cut in the reserve ratio pumps "several hundred billion yuan" into lending markets, which will in turn boost housing prices.
Beijing has, however, reiterated several times that it will keep the curbs on property ownershipand lending in tact, with People's Bank of China Governor Zhou Xiaochuan saying on Monday that the government was not using RRR cuts to boost the property sector.
Alistair Thornton, China Economist at IHS Global Insight adds that, "The government has signaled time and time again, they want prices to pull down to what is known as a reasonable level. It's [however] unclear what reasonable is."
Further adding to the market's uncertainty was the announcement by China's big four banks earlier this month that they would accelerate loan approvals for both property developers and first-time homebuyers.
These factors together with the "ministry of housing saying real estate investment will go up 25 percent" in 2012, illustrate a big conflict in signals from Chinese authorities, says Churchouse.