New rule tightens real estate loans ( 2003-06-23 09:57) (China Daily)
The central bank's recent move to tighten control on real estate loans was a
piece of good news for ordinary home buyers, experts say - despite the policy
coming under scathing criticism from real estate developers.
The central People's Bank of China issued a circular on June 13, saying
commercial banks should limit lending to real estate developers, beef up credit
management and increase the downpayments for buyers of second and luxury homes.
The policy got real estate developers firing last week.
Ren Zhiqiang, chairman of the Beijing Huayuan Property Co Ltd, says it is a
clamp down on the real estate market.
Another Beijing-based developer said through its move, the central bank has
forced them to increase housing prices.
But Li Yang, a senior economist with the Chinese Academy of Social Sciences,
said the policy is aimed at helping more people buy satisfactory accommodation.
"A new monetary policy usually considers the interests of vast ordinary
people first and not that of real estate developers," he said.
According to the policy, commercial banks are only allowed to lend to home
buyers who want to acquire finished housing.
"This will help reduce purchasing risks and interest burdens for ordinary
home buyers," said Niu Li, a senior economist with the State Information Centre.
Zhang Yan, a 29-year-old State employee from Beijing's Dongcheng District,
said if the central bank had introduced the policy earlier, she would not have
been cheated by developers.
Zhang bought an unfinished home two years ago, but later found out that the
floor space was less than she paid for.
Analysts from real estate consultant Jones Lang Lasalle said the policy is
mainly targetting poor quality and low credit real estate developers, and those
in the high-end housing market.
"It seems that the high bank non-performing loans and high luxury housing
vacancy rates triggered the new alert," one analyst said.
Real estate loans in China have been growing rapidly in recent years. The
level of outstanding real estate loans reached 1.8 trillion yuan (US$216
billion) by the end of April, accounting for 17.6 per cent of all commercial
bank loans.
As much as 80 per cent of the loans were granted in the past two years, which
helped spur the property market, said Dai Genyou, director of the central bank's
Monetary Policy Department.
Wang Zhao, a researcher with the Development Research Centre under the State
Council, said the implementation of the policy suggests the central bank has
begun to take active measures to curb overheated real estate development in some
areas.
According the National Bureau of Statistics, China's real estate investment
grew a year-on-year 32.9 per cent to 280.1 billion yuan (US$33.7 billion) during
the first five months of this year, much faster than the growth in gross
domestic product, which stood at 9.9 per cent in the first quarter.
The rapid investment resulted in more vacant homes, the bureau said.
During the first five months of the year, vacancies grew 9.2 per cent
compared with the same period last year.
Experts from the China Real Estate Association estimate there may be 130
million square metres of vacant housing, accounting for about 19 per cent of the
country's total floor space in private homes.
