Banks told to tighten grip on property market loans
Expected impact from Beijing’s efforts to cool an overheated market prompts regulator to urge lenders to protect themselves from price plunge
Bloomberg in Beijing 13 August 2011
Regulators have told the nation’s banks to tighten lending for property as the effects of government curbs may start to increase in the next three to five months, a person familiar with the matter said.
The China Banking Regulatory Commission told lenders last month not to extend the maturity of loans to developers, not to grant new credit to help developers repay maturing debt and to set significantly higher standards on loans for commercial properties than residential, the person said, declining to be named as the discussions were private.
China has worked to cool the real estate market with limits on purchases, mortgages and land sales on concerns surging prices could fuel an asset bubble and that social unrest could result from homes becoming less affordable.
This month’s market rout, sparked by concerns the global economy may be faltering, would not persuade regulators to ease their efforts to rein in property, Minzu Securities analyst Cui Juan said.
The banking regulator said banks should improve monitoring of non-residential property loans, including commercial property-collateralised loans and consumer loans. Lenders should also prevent bank loans from “illegally flowing” into the property market, it said.
“In the second half, the CBRC will urge banks to consistently implement regulatory requirements,” it said.
The regulator’s efforts to protect banks from the effects of a possible plunge in property prices have included stress tests, mortgage restrictions and increased capital requirements. Commission head Liu Mingkang last month said the nation’s banks could withstand a drop in property prices of as much as 50 per cent.
Mainland home prices rose at the slowest pace in 11 months in July, SouFun Holdings, operator of the nation’s biggest property website, said.
The State Council, China’s cabinet, said last month it would expand measures aimed at curbing home prices to smaller cities after limiting purchases in the largest urban areas, including Beijing and Shanghai.
Last year, property prices in the mainland’s 70 biggest cities rose by more than 9 per cent for nine consecutive months, according to government data. The peak increase was in May 2010, when prices gained 12.8 per cent from a year earlier.
The banking regulator told lenders that land auction failures in the first half, falling home prices in some cities and funding difficulties for smaller developers were among signs that property curbs were taking effect, the person said.
China failed to sell 353 parcels of land at auction in the first seven months of this year, 242 per cent more than the same period a year earlier, the Beijing Times reported on August 3, citing Beijing Homelink Real Estate.
Twenty six out of China’s 70 biggest cities tracked by the National Bureau of Statistics reported either a decline or no change in home prices in June as compared with May, six more than the previous month, according to the bureau. Data also showed price gains slowed in 24 cities.
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Banks told to tighten grip on property market loans
Expected impact from Beijing’s efforts to cool an overheated market prompts regulator to urge lenders to protect themselves from price plunge
Bloomberg in Beijing
13 August 2011
Regulators have told the nation’s banks to tighten lending for property as the effects of government curbs may start to increase in the next three to five months, a person familiar with the matter said.
The China Banking Regulatory Commission told lenders last month not to extend the maturity of loans to developers, not to grant new credit to help developers repay maturing debt and to set significantly higher standards on loans for commercial properties than residential, the person said, declining to be named as the discussions were private.
China has worked to cool the real estate market with limits on purchases, mortgages and land sales on concerns surging prices could fuel an asset bubble and that social unrest could result from homes becoming less affordable.
This month’s market rout, sparked by concerns the global economy may be faltering, would not persuade regulators to ease their efforts to rein in property, Minzu Securities analyst Cui Juan said.
The banking regulator said banks should improve monitoring of non-residential property loans, including commercial property-collateralised loans and consumer loans. Lenders should also prevent bank loans from “illegally flowing” into the property market, it said.
“In the second half, the CBRC will urge banks to consistently implement regulatory requirements,” it said.
The regulator’s efforts to protect banks from the effects of a possible plunge in property prices have included stress tests, mortgage restrictions and increased capital requirements. Commission head Liu Mingkang last month said the nation’s banks could withstand a drop in property prices of as much as 50 per cent.
Mainland home prices rose at the slowest pace in 11 months in July, SouFun Holdings, operator of the nation’s biggest property website, said.
The State Council, China’s cabinet, said last month it would expand measures aimed at curbing home prices to smaller cities after limiting purchases in the largest urban areas, including Beijing and Shanghai.
Last year, property prices in the mainland’s 70 biggest cities rose by more than 9 per cent for nine consecutive months, according to government data. The peak increase was in May 2010, when prices gained 12.8 per cent from a year earlier.
The banking regulator told lenders that land auction failures in the first half, falling home prices in some cities and funding difficulties for smaller developers were among signs that property curbs were taking effect, the person said.
China failed to sell 353 parcels of land at auction in the first seven months of this year, 242 per cent more than the same period a year earlier, the Beijing Times reported on August 3, citing Beijing Homelink Real Estate.
Twenty six out of China’s 70 biggest cities tracked by the National Bureau of Statistics reported either a decline or no change in home prices in June as compared with May, six more than the previous month, according to the bureau. Data also showed price gains slowed in 24 cities.
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