(Yicai) April 15 -- Lending to households in China picked up significantly in the first three months from a year earlier, in a strong sign that the real estate markets in key cities are recovering and that recent supportive policies aimed at encouraging people to buy homes and spend more money are working.

Some CNY1 trillion (USD 143.6 billion) of new household loans, mainly mortgages, were issued in the first quarter, according to the latest data from the People’s Bank of China. Of this, CNY160.3 billion (USD22.1 billion) were short-term loans and CNY883.2 billion (USD 121.9 billion) were medium- to long-term loans.

In March, new household loans soared 4.8 percent from the same period last year to CNY985.3 billion (USD136 billion). This includes CNY484.1 billion (USD66.8 billion) of short-term loans, roughly the same as a year ago, and CNY504.7 billion (USD69.6 billion) of medium- to long-term loans, an 11.7 percent jump year on year.

The recovery of the property market in core cities is driving the rapid growth in medium- and long-term household loans, Wen Bin, chief economist at Minsheng Bank, told Yicai. As property sales continue to rebound, mortgage lending by financial institutions is seeing solid growth.

The sales area of new homes in 100 major cities climbed in March from the year before, while sales of pre-owned housing in 20 key cities jumped 30 percent, according to data from the China Index Academy. The recovery was most pronounced in core urban areas.

Low mortgage rates are one of the main factors supporting the rebound of the real estate market, said Chen Wenjing, director of policy research at the China Index Academy. Since the fourth quarter last year, the interest rate on new personal housing loans has been at a historic low. In March, the average weighted rate was about 3.1 percent, a drop of around 60 basis points from a year earlier.

Short-term household loans surged to CNY484.1 billion (USD66.8 billion) in March, a big jump from the first two months, thanks to a series of policies aimed at boosting consumption and strengthening financial support.

The National People’s Congress rolled out several measures in early March to spur consumption and this has lifted demand for short-term household loans, said Wang Qing, chief macro analyst at Golden Credit Rating. For example, the trade-in scheme for durable goods has been expanded to accept more items.

Stronger Stimulus

There’s still room for further recovery in consumer sentiment, industry insiders told Yicai. Apart from short-term stimulus, building long-term systems can also help improve employment and income levels.

“Boosting jobs and incomes is the key to promoting consumption,” said Guan Tao, chief economist at Bank of China Securities. Therefore it is important to increase employment in the service sector, stabilize people’s incomes by creating more job opportunities as well as taking steps to raise people’s revenue and their returns from property.

With the roll out of the US government’s Reciprocal Tariffs, China’s economy is facing increased uncertainty, said Wen. Demand for credit from both businesses and consumers could slump this month, and authorities may need to make adjustments to policies and strengthen counter-cyclical measures.

This year’s macro policies will be much looser than in previous years, said Wang Yunjin, chief financial researcher at the Guangdong Development Chief Industry Research Institute. The central bank is likely to work closely with fiscal regulators to take steps to ensure the sustained growth of credit and social financing.

Editors: Tang Shihua, Kim Taylor