The crisis in the housing market is deepening ᐉ News from Fakti.bg – Real Estate

The People’s Bank of China cut its key interest rate on five-year loans (LPR) by 15 basis points to 4.45% to prevent a sharp decline and save the housing market. This is the second correction for the current year and the strongest in history. Most analysts expected a reduction of 5 basis points.

China’s LPR is the rate at which commercial banks lend to their best customers. It serves as a benchmark for other loans, and the five-year repayment period is usually used as a benchmark for mortgage loans.

The central bank’s decision to cut the five-year interest rate is the latest in a series of steps taken by China to tackle the real estate crisis. The blockage amid the coronavirus epidemic threatens to push the economy towards its first quarterly contraction since early 2020.

New home sales in China fell 47 percent year-on-year in April, with prices in 70 cities falling for the eighth month in a row, according to the National Bureau of Statistics.

China’s economy may shrink in the second quarter as restrictions imposed by the coronavirus harm business activity. Consumer spending and industrial production fell sharply in May, and unemployment rose to its highest level since the first months of a coronavirus epidemic in early 2020.

The real estate sector, which accounts for 30% of China’s GDP, is in a deepening crisis. Evergrande – one of the largest real estate entrepreneurs in the country, is in the process of large-scale restructuring after failing to repay its huge debt late last year. Analysts have long feared that the collapse of Evergrande could have ripple effects across the industry.

“The actions of the Central Bank signal that the management has decided to save the real estate sector as soon as possible. It also suggests that China is working hard to meet its 5.5% growth target by 2022, “said Zhaopen Xing, a senior Chinese strategist at ANZ Research.