Banking regulator warns of rising mortgage defaults as housing prices decline on weakening demand
As Shanghai property prices continue to fall, the banking regulator has warned of a rising number of mortgage defaults while reporting a drop in the secondary market and purchases by non-Shanghai people.
The report by the Shanghai office of the China Banking Regulatory Commission confirms estimates by analysts of a sharp drop in the flow of 'hot money' into the city's property market.
The commission said that as of the end of last year, the number of borrowers with Chinese banks with defaults exceeding three months had reached 7,869, an increase of 2,650 or 51 per cent from a year earlier, involving 1.54 billion yuan, up from 558 million yuan previously.
The rate of non-performing mortgages rose to 0.58 per cent at the end of December from 0.41 per cent at the end of March. 'The level is not high but we must pay attention to the risk. Banks must improve their management of mortgage credit and improve their warning systems, especially when prices are falling,' the regulator said.
Official figures published on Thursday showed that while the average house price in 70 big and medium-sized cities last month rose 5.5 per cent, down from 6.2 per cent in December, prices in Shanghai fell 0.4 per cent with those of new commercial apartments falling 3.1 per cent.
The commission said that during the second half of last year, the proportion of individual mortgages granted by mainland banks to Shanghai residents rose from 57.1 per cent in June to 68.06 per cent in December, with a corresponding fall in the amount to non-Shanghai people including those from other parts of the mainland and abroad.
