Yanlord Land hurting from tightened China property policy

Mortgage discount cancellations and longer mortgage approvals also giving it headaches.

According to Maybank Kim Eng, although China’s property price boom is largely under control, the government is still not likely to officially ease its property policy.

"Further, facing declining net interest margins, some Chinese banks recently cancelled the discounts on mortgages that they usually give to first-time homebuyers, and switched to high-margin corporate lending. The mortgage approval process in China also takes longer than before," it said.

"The timing of the mortgage discount cancellation is critical because September and October are normally the peak sales season for Chinese developers, and the credit tightening might hurt the achievement of developers’ full year sales targets," it added.

Maybank Kim Eng noted though that on the positive side, property prices in China rebounded for the second consecutive month in July. Transaction volume has also improved in the last few months. Bank lending data from the PBOC was also encouraging. Chinese banks’ August new loans reached CNY704b, much higher than the CNY540b in Jul 2012.

"The tight credit situation faced by Chinese developers will probably ease in future, as the Chinese government refocuses on economic growth," it said.

"Our understanding is that Beijing is trying to provide some financing support to property developers in order to avoid a further decline in the economy while tightening the credit supply to homebuyers to cool demand. In our view, the government’s moves show that it is still trying to find a way to balance economic growth and property price increases," it added.