Chinese regulator warns small banks against chasing property sector loans
- Some medium to small regional banks have stepped up to compete for property sector loans, as bigger banks reduce their lending, CBIRC executive says
- Lending to the sector recorded its slowest growth in eight years in April
“Some medium to small regional banks have stepped up to compete for property loans business, as the bigger state-owned banks reduce their lending,” he said. The regulator will adopt “stricter measures” against lenders that fail to heed its warning. “For banks with a relatively high ratio of newly added property loans, we will put them under a separate list, and require them to sensibly control the growth rate of property loans,” Liu added.
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The excess flow of funds into the property sector has begun to see a turnaround, said Liang Tao, the regulator’s vice-chairman.
Lending to the property sector recorded its slowest growth in eight years in April, rising 10.5 per cent year on year. Banks’ lending to the sector year-to-date has also been lower than to all other sectors, Liang said.
The number of real estate trust and wealth management products underpinned by property projects has also dropped, with the latter declining by 36 per cent.
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Four decades of rapid economic growth have turned communal housing of the Mao Zedong era into some of the world’s tallest residential towers, huge housing estates and opulent villas. China’s property market is the world’s largest, with the sales value of new homes topping US$2.7 trillion last year.
But growth in China’s real estate industry has been financed mostly through borrowing, in part because Beijing wants to control oversupply and has banned developers from selling off-plan. The industry has increasingly resorted to bank loans, bonds and any other financial instrument they can be used to fund construction activity and land purchases.
In the first quarter of this year, banks’ loans to the property sector totalled 50.03 trillion yuan (US$7.8 trillion), a year-on-year increase of 10.9 per cent. The banks added loans worth 1.67 trillion yuan during the quarter, data from the Chinese central bank shows.
The total balance of loans owed by property developers that become due this year has risen by 36 per cent to 1.2 trillion yuan from last year, according to the Beijing-based Beike Research Institute.