Property demand in China is likely to remain strong in spite of the central government’s implementation of tighter measures to curb property prices, said Richard Yorke, head of HSBC Holdings plc for China operations.
“The strength of the demand story in the medium term remains strong”, as more people move to urban areas and seek housing, said the CEO of HSBC (China) Ltd.
“That’s one of the reasons why there’s a keenness to ensure property prices aren’t as volatile, so that the demand story and people’s ability to purchase property continues to be stronger.”
Developers’ shares fell yesterday after China told banks to stop loans for third-home purchases in some cities affected by soaring property prices.
The latest measures to curb property prices come on top of orders for banks to set aside more deposits as reserves and increase mortgage rates, and re-impose sales tax on homes. The third-largest economy in the world aims to cool down its property market after prices gained 11.7 percent in March.
Mr. York said the policies will have “relatively limited” impact on HSBC’s home-loan business, because most of its lending operations are for first-mortgages as part of an overall wealth management service.
“What will be affected clearly is market sentiment,” he added.
The China Se Shang Property Index, which oversees 34 stocks, dropped 6.8 percent yesterday, the most since 19 August 2009.
China Vanke Co, the country’s biggest property developer, lost 8.2 percent as the Shanghai Composite Index fell by the most in almost eight months.
The country opened its banking industry to foreign companies in December 2006, triggering overseas banks to add outlets to compete for China’s US$7.2 trillion of corporate and household deposits. Standard Chartered plc, Citigroup Inc and HSBC are among the banks that offer yuan-denominated services for consumers in China.
“As we look for 2010, we see opportunities across all business lines,” said Mr. Yorke said, adding that banks in the country will open at least 19 new branches this year.