CHINA - Pressure is growing on the Chinese government to rethink restrictions on so-called speculative real estate investment as slowing property sector investment compounds a slowdown in the wider economy.
Data published earlier this week by the Chinese National Statistics Bureau suggested the growth rate of investment and real estate development had fallen by 1.9% from January to June to 16.6%, compared with growth of 32.9% over the same period last year.
Growth in residential development, which accounted for just over 68% of the total, fell by 1.6%.
Growth in land acquisition for development fell by 19.9% - a decline likely to hit local governments, which rely on land lease sales for income.
Meanwhile, the data show overseas investors pulling out of development funding.
Against a 5.7% increase in funding to real estate development from January to June, foreign investment was down by 53.9% to RMB20bn (€2.6bn) and domestic loans up just over 8% at RMB759.2bn.
Mark Williams, chief Asia economist at Capital Economics, told IP Real Estate the government could nod through lending to developers following significant restrictions over the past few years.
"I suspect the government will turn a blind eye if some of the extra bank lending that's likely to be extended in the next few months ends up financing the completion of mothballed property projects or the start of new projects," said Williams, a former Treasury economist.
"The alternative of holding a stricter line on property market controls would require close monitoring of bank lending. That would slow down the stimulus, which is the immediate priority."
However, he said the government would not end its anti-speculation campaign unless GDP growth continued to slow - despite a broader loosening of macro policy.
Citigroup analyst Oscar Choi in a recent research note described policy loosening - or "stabilisation", as the official line has it - as "unavoidable" if developers are to be persuaded to restart activity.
Choi posited lower deposit ratios and low-interest mortgages as possible new government measures.
