Since the beginning, China's property boom has been largely fuelled by easy credit and low interest rates on repayments.

The latest central bank figures show outstanding loans by all banks to the property sector totalled 2.77 trillion yuan (US$346 billion) at the end of 2005, up 16 per cent from a year earlier.

But the ready supply of credit is set to end. Steps have already been taken to curtail lending to property developers.

"For bankers and (real estate) developers the honeymoon is over," says Zhang Tao, a senior analyst at Centaline. "It is becoming harder and harder for property developers to secure bank loans."

Finance industry sources said some banks, including Minsheng Banking Corp, are even considering a moratorium on property development loans. Meanwhile, all lenders are said to have tightened credit policies for lending to property developers.

"A lot of property developers aren't going to be getting any fresh loans from their bankers in the coming months," predicted Wang Shujuan, a senior analyst at Shanghai stockbrokers Haitong Securities. "They will have to adjust to the lean times ahead," he added.

Michael Hart, director of China research at Jones Lang LaSalle, an international real estate agent, said he expects to see extensive consolidation of the property market in all China's major cities. Many small to medium-sized property developers will be forced to sell off at least some of their land holdings to finance on-going projects and service debts, he predicted. In Hart's view, a more mature market with less imbalance in supply and demand should emerge as a result of the consolidation.

Lina Wong, managing director of Colliers International (East China), a unit of the multinational real estate agency, also expects to see casualties among the small to medium-sized property developers. A new rule shortening the time allowed between purchasing land and developing it, will force many cash-strapped developers to sell up to larger developers, she predicted.

Page:

1

2

3

(For more biz stories, please visit Industry Updates)