Banks cutting off first-time buyers from property loans in China

December 2, 2013 Leave a comment

Banks cutting off first-time buyers from property loans in China

Staff Reporter

2013-12-02Banks in China have reduced or even stopped granting loans to property buyers even though the country’s property market has rebounded. Buyers looking for pre-owned homes are now out of luck in second and third-tier cities, reports the Chinese-language Beijing News and Economic Information Daily.

Several banks in Tianjin and Guangzhou confirmed they have stopped granting property loans or cancelled discount rates for property loan for first-time buyers. Large state-owned banks still offer property loans but do not guarantee an 85% discount rate and have extended the time needed to approve a loan.

Zhongguancun. an internet industry financial business association, said that among the 500 banks in 32 cities polled, 16.75% of banks in 17 cities have reportedly suspended property loan grants. Most of the banks emptied their loans in the first half of this year and were completely out by November or December, said Chen Guoqiang, vice director of Chinese Real Estate Association.

Property loans are no longer as lucrative as they once were for banks due to increasing competition and market-oriented interest rates. Banks can loan 30%-40% of their money to small and medium business but they can only set aside up to 10% of their funds on property loans, even though they still have to offer discounts to property buyers.

A pre-owned home property agent in Beijing said many clients have found taking out a loan increasingly time-consuming and difficult since October. It used to take 20 days to take a loan; now it takes one to two months. Many banks cannot even tell their clients when their loans will be granted.

The trading volume of the second-hand property market has declined. An agent with Honlink property said limited purchasing rights and increasing first installments have reduced investment and demand for pre-owned houses.

Many banks have chosen to suspend property loan at the moment due to uncertainties in government policy. They are concerned buyers may refuse to pay the loans and return their houses to the banks if property taxes causes property prices to drop.

Filed under Macro Trends

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