Real Estate Loans Slow in 2017

Outstanding loans related to China's real estate industry and outstanding individual mortgage loans have slowed, indicating that the property market has cooled as the central government tries to rein in speculation.

As of the end of 2017, outstanding loans related to the country's real estate industry amounted to 32.2 trillion yuan ($5.03 trillion), up 20.9% year-on-year, 6.1 percentage points lower than at the end of 2016, according to a People’s Bank of China (PBOC) report released Friday.

As of December 2017, outstanding individual mortgage loans totaled 21.9 trillion yuan, accounting for more than 68% of total outstanding loans, up 22.2% year-on-year, growing 14.5 percentage points less than in 2016, according to the report.

The slowdown in property-related loans was a result of both local governments’ tightening policies toward the market and deleveraging actions in the financial sector, an expert familiar with the industry told Caixin.

Sales in China’s property market had been boosted for nearly two years, after mortgage policies were loosened in October 2014. But the market saw a turning point with more than 100 cities rolling out strict policies toward the sector running from October 2016 to 2017.

Most big cities saw property sales shrink noticeably in 2017. The trading volume of primary residences in the southern metropolis of Shenzhen, for example, reached a 10-year record low of 25,820 units in 2017, down 36% year-on-year.

In some big cities, mortgage rates for first-home purchases are now 5% to 10% higher than the benchmark interest rates, while the rates for second-home buyers are often 20% higher. The industry is expecting the property market to continue to cool in 2018.

Putting on the brakes creates room for a transition in the real estate sector, as China's central government has renewed its emphasis on promoting rental homes, industry observers told Caixin.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)

Corrects previous story to quote slowdowns in second and third paragraphs are in percentage points