China May Ease Property Curbs for Growth, Deutsche Bank Says

China may relax its property curbs to encourage end users to buy homes as the government seeks to support economic growth, according to Deutsche Bank AG.

More “fine-tuning” by local governments of real-estate tightening measures is expected because of continued weakness in land sales and the resulting financial pressures, Tony Tsang and Jason Ching, Hong Kong-based analysts at Deutsche Bank, said in a note to clients.

The central government’s tolerance of local authorities’ attempts to loosen property curbs is growing as home prices decline, according to CEBM Group Ltd., an investment-advisory firm. Housing transactions in Beijing surged 30 percent in May from the previous month to 23,174 units, the highest since the Chinese capital imposed property controls in February last year, after banks lowered mortgage rates to support first-home buyers, Centaline Property Agency Ltd. said in a June 1 report.

“It looks like the Beijing market has broken away from the wait-and-see attitude,” the Deutsche Bank analysts wrote in the report, dated June 1, citing the rebound in sales. “We believe that the policy direction for both the China economy and property market is now quite clear - ‘loosening’ to support economic growth.”

A gauge tracking Shanghai-listed developers fell 1.4 percent before the midday break, after the nation’s non- manufacturing industries expanded at a slower pace for a second month. China Vanke Co. (000002) dropped 0.7 percent in Shenzhen trading, while Guangzhou R&F Properties Co. (2777) tumbled 5 percent in Hong Kong.

Economic Slowdown

The purchasing managers’ index fell to 55.2 in May from 56.1 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday in Beijing. That’s the lowest reading since March 2011 when the federation started seasonally adjusting the data. A reading above 50 indicates expansion.

Premier Wen Jiabao called for “putting stabilizing growth in a more important position” and didn’t mention concern about inflation in remarks published May 20 by the official Xinhua News Agency, spurring speculation the government will step up efforts to combat a slowdown in the world’s second-largest economy.

Shijiazhuang, the capital city of Hebei province neighboring Beijing, is planning five loosening measures that include allowing families whose per-capita floor space is below 30.6 square meters (329 square feet) to buy a third home, Shanghai-based CEBM analyst Shi Qi wrote in an e-mailed report on June 1.

The city’s attempt to relax property curbs shows local authorities’ revenues are under growing pressure from slowing growth, Shi wrote. The central government has kept home-purchase restrictions to curb speculation.

Some homebuyers were convinced that the market had bottomed after about 40 cities adjusted local property restrictions to encourage spending, Centaline, China’s biggest real-estate brokerage, said in the report.

--Zhang Dingmin. Editors: Andreea Papuc, Tomoko Yamazaki

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