The new mortgage rules have invited greater scrutiny of shadow lending, from which plenty of real estate brokers and other industry players have made bank as the phenomenon took root in Chinese markets a few quarters ago. Banks would now be required to thoroughly check mortgage applications and scrap loan-funded requests.
These regulatory changes are expected to cool down the continuous price increases in China’s major cities, where first-home buyers are required to pay a 20 per cent deposit. Pundits have attributed the precipitous rise to online mortgage loans, which accounted for as much as 1 trillion yuan in home sales according to local media reports.
“Those borrowers tend to be the most aggressive bidders pushing prices up,” Mizuho Securities Asia Ltd. analyst Alan Jin said, alluding to property investors rather than owner-occupiers.
“When there are fewer of them in the market, demand will be lower and prices will be more stable. And that’s the goal for the government,” Jin added, as quoted by Bloomberg Business
Officials said that the rules are meant to prevent a repeat of last year’s stock market chaos, which could potentially inflict irreversible damage on the economy should it happen to the housing sector.
“The stock market can move both ways, but the property market is absolutely the country’s bottom line. The government will never allow the real estate market to go bust,” Yingcan chief executive officer Xu Hongwei stated.
In cooperation with the central bank and other regulatory authorities, the China Banking Regulatory Commission would now prevent developers, professional networks, and other non-bank organizations from providing down payments for loans, government sources said.