CBRC backs home-loan curbs amid bubble fears
The mainland's banking watchdog has reinforced credit control policies on second-home purchases in the latest sign Beijing is worried about the formation of a property market bubble.
'In respect to certain media reports about the China Banking Regulatory Commission tightening second-home mortgage lending, [its spokesman] says today, the commission's strict enforcement of its mortgage lending policy has not changed,' the regulator said in a statement issued last night.
This indicates there will be strict adherence to the rule that down payments on second homes must be a minimum of 40 per cent.
The credit control policies were introduced two years ago by the central government to cool speculation in the market.
However, since the global economic crisis, some local governments have allowed a relaxation in the rules which, coupled with Beijing's stimulus package, have seen new loans issued on the mainland triple in the first half from a year earlier. This easier and cheaper credit has brought homebuyers flooding back to the market.
Official data shows that property sales in mainland cities rebounded 45.3 per cent to 1 trillion yuan (HK$1.13 trillion) in the first five months compared with a year earlier.
The commission said it had not changed its preferential policies to help borrowers now living in quarters smaller than the local average to buy second homes to improve their standard of living.
'But this can certainly not be extended [to other purposes]. The commission has always required commercial banks to insist on an at least 40 per cent down payment for purchases of second homes,' it said.
Home prices in 70 major mainland cities rose 0.2 per cent in June from a year earlier, the first gain in seven months, according to the National Development and Reform Commission.
The Shanghai Composite Index has surged 82.8 per cent so far this year as a significant amount of funds from the stimulus package have ended up in the stock market.
Previously, some local governments had unofficially relaxed the down-payment requirement to 30 per cent for borrowers with good credit to boost their local economies.
However, following warnings from Beijing and fears of a new credit squeeze, lenders in Hangzhou, Guangzhou and Shenzhen had already resumed credit controls on second-home purchases.
Banks in the cities told property agents and mortgage brokers that they had received a notice from the commission about risk control on mortgage lending and that down-payment requirements for all second-home deals had been raised to 40 per cent from 30 per cent.
Some agents said their Shenzhen clients had already been subject to a strict approval process since late June, causing a drop in transactions.