The municipal authorities in Beijing and Shanghai announced on September 1 that they will ease policies on residential property purchases, with all four first-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen thereby having gradually eased purchasing conditions, trying to shore up market sentiments.
In particular, reductions in downpayment ratios, lowering mortgage interest rates and adjusting eligibility criteria for first-time homebuyers have been announced.
Buyers who have already taken out a loan but do not have a house registered in their name will be regarded as “first-time” homebuyers who can also enjoy favorable interest rates.
Since the policies were issued just ahead of the weekend, inquiries from potential homebuyers in first-tier cities have risen sharply, showing market players are more optimistic about the market performance.
Moreover, starting from September 25, banks and borrowers could negotiate a rate change or a swap for a new loan, which will likely benefit about 40 million borrowers.
The real estate industry is expected to have a strong peak season in September and October, which will also positively affect the demand for steel.
In addition, there was also positive news about real estate giant Country Garden, which was at risk of default, but recently received approval to extend payments.
Steel and raw materials markets have reacted positively to the measures supporting the real estate sector and futures prices moved up first today, though easing by the end of the day, resulting in only small gains compared to the previous working day. For instance, iron ore at Dalian Commodity Exchange added 2.6 percent from Friday to a peak level of RMB 865.5/mt ($119/mt), though it ended the day at RMB 844.5/mt ($116.2/mt), just 0.1 percent above the previous trading day. Rebar and HRC at Shanghai Futures Exchange have closed a day 0.35 percent and 0.2 percent higher respectively today. “Supportive measures are good, but until we see demand [for steel] going up or production cuts as announced [which have failed to start just yet] prices will only remain at the current levels, I think,” a Chinese trading source said.