Property | International

Tighter loans to hit Shanghai property prices

Billionaire developer Vincent Lo says the Chinese government is pushing banks to hold back lending to developers

  • Bloomberg
  • Published: 00:00 September 16, 2011
  • Gulf News

Expensive location
  • Image Credit: EPA
  • Nanjing Road, the premier commercial street in Shanghai, is packed with shoppers. China has expanded its property control measures this year, raising down-payment requirements and mortgage rates to ease gains in home prices.

Beijing: China's property prices may fall in the next 12 to 18 months as banks curb loans to real estate companies, which may slow development, Hong Kong billionaire developer Vincent Lo said.

The government is pushing banks to hold back lending to property firms as it attempts to cool the housing market, said Lo, chairman of Shui On Land Ltd. The developer received a Chinese bank's approval for a loan, which was withdrawn as the lender had a policy change, he said.

"We believe maybe the market is going to go through a tough time for another 12 to 18 months, and then I think it's a good time to go and buy something" when prices are lower, said Lo, who's known as "Mr Shanghai" after transforming century-old homes into a pub and entertainment project in the city's Xintiandi district.

Easing gains

China has expanded its property control measures this year, raising down-payment requirements and mortgage rates to ease gains in home prices. The government said in July it will rein in prices in smaller cities after limiting home purchases in markets such as Beijing and Shanghai.

The Shanghai-based developer has found a foreign bank for the loan for one of its projects in China, Lo said, declining to identify the development or the bank. Such cancellations are "happening quite frequently" to other real estate developers in the country, he added, referring to the Chinese lender which withdrew the loan it had approved for the company.

"For local developers, I think they would be going through a tough time right now," Lo said. "That would bring the price down."

Chinese regulators have told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens in the next three to five months, a person familiar with the matter said last month.

The property tycoon said he remains bullish on China's residential and commercial property markets in the long term with more citizens moving into cities, creating demand for homes, shops and office buildings. "Right now, the commercial properties, if it is in a good location, good design, it will do very well," Lo said.

Shui On said in June it will spend about 8 billion yuan (Dh4.6 billion) to develop an office and restaurant precinct under its Xintiandi brand near Shanghai's smaller airport and high-speed rail station.

Xintiandi, which means New Heaven and Earth in Chinese, is a residential and commercial complex built through the redevelopment of houses dating back to the 19th and 20th centuries located in downtown Shanghai. The project attracted local and international retailers and restaurants, including Paulaner Brauhaus and Starbucks.

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