(Yicai Global) Oct. 21 -- China’s property market is showing signs of recovery. Industry data show that mortgage rates fell in several cities this month, with bank lending accelerating in some.

But industry insiders interviewed by Yicai Global believe the market still has a long way to go to get out of the doldrums.

Mortgage rates in these Chinese cities fell in October from the previous month, the first month-on-month decline of the year, according to a 90-municipality real estate market study released by the Beike Research Institute yesterday.

The average rate on a first-home loan in those 90 cities was 5.73 percent and the second-home loan rate was 5.99 percent, both down 1 basis point from September, the report noted.

Apart from Guangzhou and Shenzhen, two first-tier cities in Guangdong province, the other 20 cities in which mortgage rates fell more sharply in October than in September were small- and medium-sized ones, the report said.

Among them, Luoyang in central Henan province saw the largest decline in first-home loan rate, down 25 basis points from September.

Looking at the fall in mortgage rates, the report said the central bank proposed in late September to safeguard the healthy development of the real estate market and protect the legitimate rights and interests of home buyers. That came in response to regulatory guidelines that banks in some cities cut mortgage rates this month, it added.

The report also said that the average time spent by lenders in the 90 cities to offer loans was 74 days in October, a bit longer than the previous month. But bank lending in several cities, including first-tier Shanghai, has accelerated compared with September.

Quickening Pace

A real estate broker in Shanghai told Yicai Global that lending has been a little faster lately. Some home buyers in Zhengzhou, the capital of Henan, also reported the same thing.

“The sharp decline in commercial housing sales some time ago, the tight capital constraints on property developers, and the intensity of debt defaults should be closely related to the credit crunch in the real estate sector,” a report by the China Index Academy said.

Local governments are rectifying the excessively tightened credit policies, according to recent statements from regulators, and as such lending to the real estate sector is expected to accelerate. But the industry is still slightly less confident about the short-term market outlook.

An industry insider in Ningbo, Zhejiang province, told Yicai Global that the downward mortgage rate will not have much of an impact on market confidence, unlike before when even a 10 percent to 20 percent drop in interest rates would immediately stoke the property market.

“At the moment, lending is still relatively slow as banks are very strict in their examination of application materials,” a Beijing real estate agent said. “And no bank can commit to the timing of the loan.”

Home buyers are still waiting for loans to be issued, and may have to wait until early next year, he added.

Editors: Tang Shihua, Peter Thomas