China Tightens Grip on Property Market with New Restrictions

Strategic Insights -

As part of its efforts to curb soaring property prices, the Chinese government has unveiled a series of measures to rein in the market. The China Banking Regulatory Commission (CBRC) has directed financial institutions to place restrictions on loans to property developers, while the Ministry of Housing and Urban-Rural Development has prohibited pre-sales by developers unless they have obtained government approval. These measures are aimed at preventing developers from hoarding property illegally and pushing up prices.

Key Takeaways:

  • The China Banking Regulatory Commission (CBRC) has ordered financial institutions to restrict loans to property developers that engage in land speculation, possess idle property projects, or have idle land.
  • Banks are not allowed to provide loans to property developers that will use the bank loans to pay land transfer fees.
  • Property developers are required to mortgage projects that are under construction and repay bank loans according to the progress made in property sales.
  • Developers are no longer permitted to receive downpayments for unfinished properties unless they have obtained government approval for pre-sales.
  • Developers are required to publish prices of each unit within 10 days of receiving approval for pre-sales.
  • The government has set a deadline for developers to complete property projects, and those that fail to meet this deadline will be liable for a fine.
  • The government has also allowed banks to refuse loans for third home purchases.
  • Banks provided a total of 845.7 billion yuan (US$123.9 billion) worth of new loans to the real estate sector in the first quarter of 2010.
  • Loans totaling 320.7 billion yuan were extended for real-estate developers in Q1, with a balance of 53.4% year-on-year growth.
  • The balance of such loans as of the end of the first quarter rose 31.1% year on year, 0.5% higher than the balance at the end of 2009.
  • Personal mortgage loans hit 522.7 billion yuan in the first quarter, with a balance of 53.4% year-on-year growth.

Statistics:

  • 845.7 billion yuan (US$123.9 billion) worth of new loans provided to the real estate sector in the first quarter of 2010.
  • 320.7 billion yuan of loans extended for real-estate developers in Q1.
  • 53.4% year-on-year growth in the balance of personal mortgage loans as of the end of the first quarter.
  • 31.1% year-on-year growth in the balance of loans extended to real-estate developers as of the end of the first quarter.
  • 10.3% higher balance of personal mortgage loans at the end of the first quarter compared to the end of 2009.
  • 0.5% higher balance of loans extended to real-estate developers at the end of the first quarter compared to the end of 2009.

Sources:

  • China Securities Journal
  • Ministry of Housing and Urban-Rural Development
  • China Banking Regulatory Commission (CBRC)
  • Xinhua News Agency (XIC)