The Suspicion of Individual Residential Housing Loans

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CEIC China Data Talk - June 3, 2014 - Individual residential housing loans are a key component of total real estate loans. It constituted 61.6% of the total number of real estate loans in 2013. The percentage share is even higher if several other types of consumer loans are to be included in the calculation. This is evidence to support the argument that "the public has acted as guarantors of the source of funds for real estate loans". What is the level of housing valuation nowadays? What will be the end result of providing extensive convenience to the first-time mortgage applicants? It is certainly worth deliberating. Recently the People's Bank of China (PBC) has given priority to first-time borrowers of individual residential housing loans, putting them on the top of the list. This action will further push the percentage of individual housing loans much higher. From this one can infer that residential housing loans can be viewed as a strong source of funding for real estate developers. Nevertheless, time is needed to test the effectiveness of this new policy. Putting first-time mortgage applicants as a top priority shows banks are just might be providing conveniences to these borrowers. Yet, in reality how well are the banks executing this policy? What is the financial situation of individual home-buyers? In the end, the actual beneficiaries of this policy could well be real estate developers. This may be the real objective of this policy. With the above policy in place, the tightened capital chain of real estate developers can then be loosened. The quality of the banks' loan portfolios will also improve. Therefore it is not hard to connect this with the government's intention to rescue the property market. However, even if this is an attempt to rescue the market, it has come far too late. While previous measures seemingly did not hit their targets, the downward adjustment of the property prices has already become inevitable. The next questions to ponder are: how long and how deep will the price adjustment go and how will the government react to this adjustment. By the China Database Team Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

3rd June 2014 The Suspicion of Individual Residential Housing Loans

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