CBRC chief's property comments hint at easing of credit slowdown

PUBLISHED : Monday, 12 April, 2010, 12:00am
UPDATED : Monday, 12 April, 2010, 12:00am

China's housing market was being driven by a 'huge' demand, the country's top banking regulator said yesterday.

'There is a huge need for Chinese people to buy their first or second home,' said Liu Mingkang, the chairman of the China Banking Regulatory Commission, in remarks made at the Boao Forum.

The blunt comments from the man responsible for overseeing bank lending and avoiding a credit blow-out suggest that China will continue to promote home ownership and will not crack down heavily on credit expansion. However, there may be more of the smaller steps already taken to curb over-aggressive lending by banks.

Property prices have been soaring in key cities since last year, generating concerns about the possibility of a price bubble.

The State Council has introduced measures on credit and land supply to curb the rising prices to address mounting social discontent about the cost of housing.

However, property prices have so far kept climbing. In February, the average price of a home in 70 cities rose 10.7 per cent from a year ago, the quickest pace of growth since March 2008.

Liu attributed the demand and price growth to continuing urbanisation and China's efforts to boost domestic consumption. While any market had price fluctuations, he added, he did not believe there was a serious downside risk for China property prices at present.

'Even if there is downside pressure, we have enough bullets to deal with it,' Liu said.

To guard against any backfire from the lending spree last year, the banking regulator had asked banks to report on the quality of their loanbooks by the end of June and to limit lending to land developers, he said.

Banks on the mainland made a record 9.6 trillion yuan (HK$10.9 trillion) of new loans last year to help finance the country's stimulus package. This year, the new loan target is set at 7.5 trillion yuan.

'We are watchful of risk exposure after the credit boom. Banks should be selective in supporting property developers. The CBRC has instructed banks to lower loan-to-value ratios when lending to companies acquiring land,' Liu said.

Land prices more than doubled last year, and fresh price records were set frequently. Liu said the land market should be better regulated to ensure land deals were open, fair and transparent.

He also said that banks in Beijing were now requiring buyers of second homes applying for a mortgage to make a down payment of more than 60 per cent of the value of the property, against the 40 per cent previously, to discourage speculative buying.

First-time owner-occupiers taking out a mortgage need a down payment of only 20 per cent.

Xu Jiadong, the chairman of the Taiwan Academy of Banking and Finance, said at the forum that the rise in property prices on the mainland was mainly caused by the country having too much liquidity as a result of the surplus in its international balance of payments.