The central bank's 27-basis-point interest rate increase has had
little impact on home and stock prices in the short run, but rubbed
salt into the wounds of an already sluggish real estate
industry.
"The rise will have little effect on home prices in general and
people won't suspend purchases because of it," said Pan Shiyi,
chairman and co-president of SOHO China.
Property stocks in general did not drop but instead climbed on
the back of a rise in the benchmark index of Shanghai and Shenzhen
bourses.
But Wang Deyong, senior property stock analyst from CITIC
Securities, described the rate rise as "bad news" for the
industry.
"Due to the sluggish situation in areas where the real estate
companies operate, the rise of property stocks can only last a
short time," said Wang.
Wang said he believes several factors have already exacerbated
the difficulties of the real estate industry in China.
"We predicted the government will soon roll out a new round of
macro control measures to regulate this industry, and these
measures are very likely to be more intensive than those of last
year," Wang said.
It's generally believed that the regulatory measures adopted by
the central government last year, which included tax, interest
rate, mortgage as well as land policy, did not achieve the expected
results and failed to rein in the rapid increase of housing prices
across the nation.
In addition, two positive functions that the real estate
industry can perform - one in pushing forward social development
and the other in propelling the building of a prosperous society -
did not figure at the recent session of the National People's
Congress though previously mentioned.
In view of this, Wang said, "We remind investors to maintain a
cautious attitude toward stocks in this particular sector since the
whole industry is still in the doldrums."
Starting with the interest rate hike, Wang holds, other macro
control measures will follow soon. "These policies are serious
tests for the industry," Wang said.
(China Daily March 20, 2007)