Home » Business » Real Estate
Double whammy hits home buyers
By Zhang Fengming |
February 25, 2010, Thursday
|
Print Edition
Print Edition
DONNA Pang, who spends weekends searching for the home of her dreams, is facing a double whammy: banks are raising mortgage rates as the government moves to cool a market bubble, but housing prices in Shanghai remain stubbornly high.
Pang, a white-collar worker in the city, started scouring the market to buy a home in the middle of 2009 and now regrets being too picky to make a deal.
"The salad days of easy credit are gone, but home prices are still high and out-of-reach," she sighed. "I should have made hay while the sun shines."
Indeed, more and more banks are taking a tougher stance on home mortgages, making it more difficult for Pang and other home buyers to lock in lower interest rates and easier down payments.
In early February, the Bank of China became the first bank to tighten its individual mortgage policies, raising the bar for first-time home buyers.
Previously, almost all first-time home mortgage applicants were offered 30 percent rate discounts and made only 20 percent down payments on first homes.
But now the bank is accepting only applicants with good credit ratings and requiring them to pay as much as 40 percent down payments, while limiting discounts to a select few.
"The days of easy access to 30 percent discounts on mortgage rates are gone," said a BOC source who declined to be identified. "It will certainly be much harder to get preferential rates in the future."
The crack down is no flash in the pan.
The Bank of Communications, the fifth-biggest bank in China, tightened its mortgage policy on February 10, removing 30 percent rate discounts for first-time home buyers and charging premium on rates on second home loans.
"A 15 percent discount on mortgage rates is becoming the norm," one BoCom source said. "We're not alone in the move. We're just following suit."
Despite the tougher stance, housing prices in Shanghai still rose 8.8 percent in January from a year earlier. That was an unadjusted 0.7 percent gain from December. The price rises occurred across major Chinese cities.
China's urban property prices in 70 major cities in January posted their biggest gain of 9.5 percent in 21 months, according to the National Development and Reform Commission.
It was the eighth straight monthly rise since home prices began recovering after a six-month decline triggered by the global financial crisis.
"Most developers don't have any incentive to cut prices because new home supplies lag demand," said Chen Sheng, deputy dean of the China Index Academy.
Policy shift
The bullish sentiment from developers is in a sharp contrast to the cloudy atmosphere in late 2008 when the real estate market lost steam and many developers wobbled on the brink of collapse.
To reignite growth, China shifted to a moderately loose monetary policy in 2009 and rolled out supportive policies for the real estate sector.
In October 2008, the People's Bank of China, the central bank, allowed banks to double the prevalent 15 percent discount on mortgage rates for first-time home buyers. It also allowed the minimum down payment to go down to 20 percent from 30 percent.
The shot in the arm worked quickly, reviving both sales and prices of homes since last March.
In Shanghai, the average prices of existing properties rose 41 percent last year to 14,700 yuan (US$2,152) per square meter at the end of December. Prices of new homes jumped 65 percent to an average 20,187 yuan per square meter.
The increases have put a new home further out of reach for many budget-conscious consumers. Personal disposable income last year in Shanghai's edged up 8.1 percent from 2008 to 28,838 yuan per person, according to a survey made by the Shanghai General Team at the National Statistics Bureau.
Now the government has reversed course and is trying to avoid a housing bubble.
The State Council, China's Cabinet, said in December that effective this year it will reimpose the 5.55 percent tax on buyers who sell homes less than five years after purchase. Previously, they were exempt from the tax if they sold their properties two or more years after purchase.
On December 18, China raised the down payment on land acquisitions to at least 50 percent from a previous range of 20 percent to 30 percent.
Banks are now required to strictly adhere to a requirement of 40 percent down payment on purchases of second homes as part of the government crackdown on property speculation. The banks largely turned a blind eye to that regulation last year.
In anticipation of tougher policies, home transactions surged in December.
In Shanghai, individual mortgage loans soared to a record as banks heavily extended credit to home buyers rushing to sign contracts at the tail end of preferential policies.
Individual mortgages rose 19.1 billion yuan in January from a year earlier to 19.6 billion yuan, the Shanghai headquarters of the PBOC said.
Analysts said it makes sense for banks to remove rate discounts as authorities squeeze credit.
"Authorities took a tougher-than-expected stance on curbing loan growth this year," said Gao Yuan, an Essence Securities analyst. "The curb also means that banks can benefit from rising pricing due to the limited supply of loans."
The government's new policies are beginning to bear fruit. New home sales in Shanghai last month halved to 700,000 square meters, according to Shanghai Uwin Real Estate Information Services Co. The January drop was the biggest in the last couple of years.
Pang, who hasn't given up on her dream of buying a home, is now hoping that home prices will eventually follow sales figures lower.
Pang, a white-collar worker in the city, started scouring the market to buy a home in the middle of 2009 and now regrets being too picky to make a deal.
"The salad days of easy credit are gone, but home prices are still high and out-of-reach," she sighed. "I should have made hay while the sun shines."
Indeed, more and more banks are taking a tougher stance on home mortgages, making it more difficult for Pang and other home buyers to lock in lower interest rates and easier down payments.
In early February, the Bank of China became the first bank to tighten its individual mortgage policies, raising the bar for first-time home buyers.
Previously, almost all first-time home mortgage applicants were offered 30 percent rate discounts and made only 20 percent down payments on first homes.
But now the bank is accepting only applicants with good credit ratings and requiring them to pay as much as 40 percent down payments, while limiting discounts to a select few.
"The days of easy access to 30 percent discounts on mortgage rates are gone," said a BOC source who declined to be identified. "It will certainly be much harder to get preferential rates in the future."
The crack down is no flash in the pan.
The Bank of Communications, the fifth-biggest bank in China, tightened its mortgage policy on February 10, removing 30 percent rate discounts for first-time home buyers and charging premium on rates on second home loans.
"A 15 percent discount on mortgage rates is becoming the norm," one BoCom source said. "We're not alone in the move. We're just following suit."
Despite the tougher stance, housing prices in Shanghai still rose 8.8 percent in January from a year earlier. That was an unadjusted 0.7 percent gain from December. The price rises occurred across major Chinese cities.
China's urban property prices in 70 major cities in January posted their biggest gain of 9.5 percent in 21 months, according to the National Development and Reform Commission.
It was the eighth straight monthly rise since home prices began recovering after a six-month decline triggered by the global financial crisis.
"Most developers don't have any incentive to cut prices because new home supplies lag demand," said Chen Sheng, deputy dean of the China Index Academy.
Policy shift
The bullish sentiment from developers is in a sharp contrast to the cloudy atmosphere in late 2008 when the real estate market lost steam and many developers wobbled on the brink of collapse.
To reignite growth, China shifted to a moderately loose monetary policy in 2009 and rolled out supportive policies for the real estate sector.
In October 2008, the People's Bank of China, the central bank, allowed banks to double the prevalent 15 percent discount on mortgage rates for first-time home buyers. It also allowed the minimum down payment to go down to 20 percent from 30 percent.
The shot in the arm worked quickly, reviving both sales and prices of homes since last March.
In Shanghai, the average prices of existing properties rose 41 percent last year to 14,700 yuan (US$2,152) per square meter at the end of December. Prices of new homes jumped 65 percent to an average 20,187 yuan per square meter.
The increases have put a new home further out of reach for many budget-conscious consumers. Personal disposable income last year in Shanghai's edged up 8.1 percent from 2008 to 28,838 yuan per person, according to a survey made by the Shanghai General Team at the National Statistics Bureau.
Now the government has reversed course and is trying to avoid a housing bubble.
The State Council, China's Cabinet, said in December that effective this year it will reimpose the 5.55 percent tax on buyers who sell homes less than five years after purchase. Previously, they were exempt from the tax if they sold their properties two or more years after purchase.
On December 18, China raised the down payment on land acquisitions to at least 50 percent from a previous range of 20 percent to 30 percent.
Banks are now required to strictly adhere to a requirement of 40 percent down payment on purchases of second homes as part of the government crackdown on property speculation. The banks largely turned a blind eye to that regulation last year.
In anticipation of tougher policies, home transactions surged in December.
In Shanghai, individual mortgage loans soared to a record as banks heavily extended credit to home buyers rushing to sign contracts at the tail end of preferential policies.
Individual mortgages rose 19.1 billion yuan in January from a year earlier to 19.6 billion yuan, the Shanghai headquarters of the PBOC said.
Analysts said it makes sense for banks to remove rate discounts as authorities squeeze credit.
"Authorities took a tougher-than-expected stance on curbing loan growth this year," said Gao Yuan, an Essence Securities analyst. "The curb also means that banks can benefit from rising pricing due to the limited supply of loans."
The government's new policies are beginning to bear fruit. New home sales in Shanghai last month halved to 700,000 square meters, according to Shanghai Uwin Real Estate Information Services Co. The January drop was the biggest in the last couple of years.
Pang, who hasn't given up on her dream of buying a home, is now hoping that home prices will eventually follow sales figures lower.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
