Financing for Chinese developers slows to a trickle after credit crack down
As well as bank loans, alternative financing channels have shut their doors to developers
Credit flow to Chinese developers has slowed to a trickle after authorities further tightened the screws on funding sources since March, leaving overseas financing as one of the few options left for home builders.
In China, bank credit flows to developers mainly through mortgages. In the first quarter medium to long-term household loans – mostly mortgages – grew by 1.46 trillion yuan (US$212 billion), accounting for 34.6 per cent of total loan growth, according to the People’s Bank of China.
That’s down from 44.9 per cent last year. In 2016, the big four Chinese banks granted a combined 2.76 trillion yuan worth of mortgages, up 30 per cent from a year ago. New mortgages accounted for 81.8 per cent of total new loans at the Bank of China.
The upsurge in mortgage lending fuelled a more than 30 per cent home price rally in first and second-tier cities last year, but that looks set to change.
Under Beijing’s moves to rein in credit growth in the overheated property sector, the central bank has stipulated that banks’ outstanding mortgage growth in the first quarter cannot exceed that of the fourth quarter last year, in both absolute numbers and growth rate terms. Agricultural Bank of China, one of the big state-owned lenders whose mortgage growth rate last year was 32.8 per cent, vowed to keep growth rates below that amount this year while China Construction Bank also promised the same.
