China tells banks to crimp Nov home loans

Employees setting up model flats for an exhibition in Hangzhou. The city has implemented new rules for home buyers, including higher down payments for second homes and curbs on non-residents buying properties.
Employees setting up model flats for an exhibition in Hangzhou. The city has implemented new rules for home buyers, including higher down payments for second homes and curbs on non-residents buying properties.PHOTO: REUTERS

BEIJING • Regulators in China have told banks that new home mortgage loans this month must be below those issued last month, the Shanghai Securities Journal reported, citing industry sources, as Beijing looks to curb rising leverage in the housing sector.

Mortgages accounted for 35 per cent of loans in the first half of this year, but analysts estimate that the figure jumped to 71 per cent in July and August as frantic buying kicked in, thanks to rapidly rising prices.

China's banking regulator previously asked lenders to step up risk management of property loans amid record gains in house prices that have raised concerns of price bubbles and ballooning debts.

China's new home prices rose in September at the fastest rate on record, according to data published by the National Bureau of Statistics on Oct 21.

Outstanding mortgage loans to individuals rose 33.4 per cent to 17.93 trillion yuan (S$3.7 trillion) from a year ago by the end of September, China's central bank said on the same day.

Banks need to focus on controlling credit risks and replenish capital reserves in the face of potential challenges from an ageing population, a contraction in credit and falling home prices, reported the Shanghai Securities Journal, citing a source close to the regulator.

Local governments in at least 21 cities have also introduced property curbs - such as requiring larger down payments and limiting purchases of multiple dwellings - in a bid to arrest runaway prices.

A buoyant property industry helped the world's second-biggest economy grow 6.7 per cent in the third quarter from a year earlier.

Last month, the nation's overheated property market showed tentative signs of cooling, with prices in some of the hottest cities falling this month as the authorities stepped up curbs to avert a potentially ruinous housing bubble.

Meanwhile, second-tier city Hangzhou yesterday implemented new rules for home buyers, including higher down payments for second homes and restrictions on non-residents buying properties, the city government said on its official microblog late on Wednesday.

Dozens of cities have implemented measures restricting home purchases over the past few months as price gains spread to more cities.

Hangzhou's new home prices rose 28 per cent year on year in September, according to official data.

REUTERS

A version of this article appeared in the print edition of The Straits Times on November 11, 2016, with the headline 'China tells banks to crimp Nov home loans'. Print Edition | Subscribe