(Yicai) May 22 -- While China’s real estate bond market has been strengthening after the introduction of a series of major supportive policies, the capability of debt-laden property developers to raise funds still needs time to recover.

The Chinese real estate bond market has improved for two days in a row. The CSI Real Estate Bond rose 0.03 percent yesterday and 0.05 percent the day before, up a cumulative 3.4 percent since the beginning of the year, compared with a 0.84 percent rise for the whole year last year.

On May 17, the People’s Bank of China lowered the minimum down payment ratio for individuals purchasing their first and second homes to 15 percent and 25 percent from 20 percent and 30 percent, respectively. The central bank also cut the interest rates on the housing provident fund by 25 basis points to 2.35 percent on mortgages with a term of less than five years and to 2.85 percent on mortgages with longer maturities.

Moreover, the PBOC established a CNY300 billion (USD41.5 billion) relending system to support government-subsidized housing projects and encourage local state-owned enterprises to buy reasonably-priced commercial properties that have completed construction and use them to provide affordable housing options.

Despite the improvements in the real estate bond market, the recovery of the fundamentals of the property market, the debt repayment issue of developers, and the revitalization of their fundraising capabilities still call for more time to stabilize and recover.

Moreover, the housing market’s prosperity index still needs to recover, and the generalized ratio of property inventories to sales continues to be at relatively high levels, according to data from Tianfeng Securities.

The liquidity issues of Chinese property developers remain a huge problem. In fact, two more builders defaulted on debts this month. An industry insider explained to Yicai that developers’ liquidity and bond financing have not yet improved. 

“The pressure on the Chinese real estate sector’s fundamentals is still great given the recent housing market situation, and some developers are still facing great debt-relevant pressure,” said Sun Binbin, chief fixed income analyst at Tianfeng Securities. 

Supportive policies will play their role of speeding up the industry’s recovery in the long run, but more time is needed for their impact to reach the real estate sector’s fundamentals, according to an industry analyst at a securities brokerage.

Editor: Futura Costaglione