China's demand for property is likely to remain strong even as the central government imposes tougher measures to curb property prices, according to Richard Yorke, the head of HSBC Holdings Plc's China operations.

"The strength of the demand story in the medium term remains strong" as more people move to urban areas and seek housing, Richard Yorke, chief executive officer of HSBC (China) Ltd, said in an interview on Monday in Shanghai.

"That's one of the reasons why there's a keenness to ensure property prices aren't as volatile so that the demand story and people's ability to purchase property continues to be stronger."

Developers' shares tumbled on Monday after China told banks to stop loans for third-home purchases in some cities to curb property prices.

The latest measures come on top of orders to banks this year to set aside more deposits as reserves and raise mortgage rates, and steps to re-impose a sales tax on homes. The world's third-largest economy aims to cool its property market after prices gained a record 11.7 percent in March.

The measures may lead average home prices to fall as much as 10 percent in major Chinese cities, while values of mid- and high-end properties may fall 20 percent, according to Deutsche Bank AG's Greater China Chief Economist Jun Ma.

HSBC, which operates more branches in China than any other overseas bank, said the policies will have "relatively limited" impact on its home-loan business because the majority of its lending is for first-mortgages as part of an overall wealth management service, Yorke said.

'Market sentiment'

"What will be affected clearly is market sentiment," he said.

The China Se Shang Property Index, which tracks 34 stocks, fell 6.8 percent as of the close, the most since Aug 19.

China Vanke Co, the nation's biggest property developer, lost 8.2 percent as China's benchmark Shanghai Composite Index slumped by the most in almost eight months.

Chinese banks offered 2 trillion yuan (US$293 billion) in new loans to the real estate sector in 2009, including property development and home mortgages, fourfold the amount offered in the same period in 2008, according to the central bank.

New loans for home purchases rallied fivefold to 1.4 trillion yuan last year, the People's Bank of China said.

China opened its banking industry to overseas companies in December 2006, sparking a rush among foreign banks to add outlets to compete for the nation's US$7.2 trillion of corporate and household deposits.

HSBC, Citigroup Inc and Standard Chartered Plc are among those that offer yuan-denominated services for consumers in China. "As we look for 2010, we see opportunities across all business lines," Yorke said.

(China Daily April 20, 2010)