The People's Bank of China cut the benchmark interest rate by 1.08 percentage points on Wednesday, the biggest slash in 11 years, lowering the one-year lending rate from 6.66 to 5.58 percent.

"The rate cut, which can help cut the cost of property developers' financing and property buyers' individual mortgage, is definitely good news to the real estate industry," said Qin Xiaomei, research chief at CB Richard Ellis' Beijing branch.

The cut means a homebuyer could save as much as 900 yuan each month on a 10-year, one-million yuan mortgage.

"But the rate cut will hardly revitalizes the sluggish nature of the market," said Qin.

Property prices in China's 70 large and medium-sized cities rose 1.6 percent year-on-year in October, the lowest growth rate since 2006, according to the National Development and Reform Commission.

James Macdonald, a Savills Research Department senior manager, agreed.

"The main impact of the rate cut will be to help stabilize the market by supporting the economy," said Macdonald. "While individuals will take the interest rate cut into account, their main consideration will still be the overall health of the property market and whether they believe property prices will continue to fall or not."

The lending rate for real estate firms also dropped, but the question is whether they can get loans from the banks at all now, said Qin.

Rising risk in the property sector mean most banks are more prudent with loans to real estate firms.

"Bad loans from property developers may see a big jump after the Spring Festival," said a manager with Industrial and Commercial Bank of China, the country's largest lender.

The tightened cash flow has already prompted many real estate firms to sell their projects at assets and equity exchanges

Over 60 projects have been transferred in the equity exchanges in Beijing, Tianjin, Shanghai and Chongqing since September, according to the four equity exchanges' own statistics.

"The market may warm up in the second half of 2009 or the first half of 2010, but that still depends on the recovery of the global market," said Macdonald.

(China Daily November 28, 2008)