Home mortgage loans pick up in some cities, though overall credit environment remains tight

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There are signs that banks’ mortgage loans are picking up in some cities, including tier-one cities, offering a relief to cash-strapped property developers. But industry insiders say that the overall credit environment remains tight and the policy stance for the real estate sector hasn’t changed.

“I applied for mortgage loans in mid-August and the bank told me back then that I would have to wait until January next year. Surprisingly, I recently received the loans,” said a second-hand home buyer in Shanghai.

A staff of a large real state broker in the city said that “waiting time for second-hand home mortgage loan approvals has been shortened recently. In the past few months, waiting time was about 4 – 6 months and now it’s only half of that, although not every bank is accelerating the loans.”

A smaller broker in the city said that”our second-hand home mortgage business volume is small in Shanghai and we haven’t seen notable pick-up in loan approvals at banks that we work with.”

“We now have mortgage quota for second-hand home buyers. After they submit all required documents, it takes only a couple of days for them to get approvals,” said a staff at Shenzhen branch of a state-owned bank.

Separately, a staff at a joint-stock bank in the capital city of Beijing said “we’ve got mortgage quota for November. There is no limit on one single loan for qualified buyers. Loan approval can take less than a month, but I’m not sure about the situation next month.”

A person at another Shanghai-based bank said that it now takes 3 – 4 months for second-hand home buyers to get mortgage loans, faster than in July and August, adding that “mortgage loans increased slightly but not much.”

“Currently, loans being delivered are mostly those applied in August and September, even in June and July. Restrictions remain and mortgage loan quota is still being controlled,” he said.

In the meantime, some banks remain cautious in the business, with a loan manager at a state-owned bank’s Guangzhou branch saying that “home buyers still need to wait and there may not be any quota until early next year.”

In October, banks granted some 150 billion yuan to 200 billion yuan ($31 billion) more property loans than in September, according to a Thursday report from state-backed media outlet Cailianshe, citing unidentified sources.

Chinese regulators including the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) have repeatedly pledged to “safeguard healthy development of the real estate market and protect home buyers’ rights.”

Authorities do not want genuine buyers to be shut out of the market or developers to face delays in receiving payments.

The PBOC and the CBIRC held a special meeting about real estate financing at the end of September, asking banks to correctly understand and implement policies on real estate financing, maintain steady and orderly loans to the sector and promote healthy development of the housing market.

“Previously, bank lending to the real estate sector had been strictly restricted, but after recent adjustments, banks can offers loans to the sector normally,” said Dong Ximiao, chief analyst at chief analyst at Merchants Union Consumer Finance.

Beike Research Institute said that the PBOC has sent several positive signals since the end of September and real estate lending is expected to return to a “steady and orderly” situation in the fourth quarter.

The improvement in credit environment will help improve market expectation and encourage potential home buyers to make purchase decisions, said Beike.

Meanwhile, loan approval had also been faster due to fewer home buyers waiting in the queue, said Zhang Dawei, chief analyst with property agency Centaline.

According to data from China Rea Estate Information Corporation (CRIC), second-hand home transactions in the country’s 10 major cities declined 48% year over year in October, down 40% from the same period in 2019.

Data from the Guangzhou Real Estate Intermediary Association, second-hand home transactions in the city fell 15.25% in October from a month earlier, slumping 50.9% from a year earlier. In Shanghai, second-hand home transactions fell 33.235 month on months in September.

Analysts also noted an acceleration in the issue of residential mortgage-backed securities (RMBS) by banks, implying banks are given another capital-raising route as they use up funds to lend to home buyers.

“The issuance of local RMBS reached 77 billion yuan in September,” said Huatai Securities.

“Issuance resumed after a two-month halt and rose by a significant amount, which we see as a gesture of (regulatory) guidance.”

As of end-September, outstanding mortgage loans reached 37.37 trillion yuan ($5.84 trillion), central bank data showed.