Real Estate Loan Growth Drops to Eight Year Low in China

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China has seen real estate lending drop to an eight-year low, amidst efforts by Beijing to prevent property markets from overheating due to speculative activity.

Data from Chinese regulators indicates that as of the end of April 2021 YoY growth in banking sector real estate loans stood at 10.5%, for its lowest level in eight years, and uninterrupted decline since the start of 2021.

State-owned media said that the fall is just one of “Five Ongoing Declines” in the Chinese property market at present, which also include:

  • A decline in the “real estate loan concentration index” (房地产贷款集中度) – a measure of real estate loans as a share of all lending by Chinese banks. The real estate loan concentration saw a YoY decline of 0.5 percentage points at the end of April, for the seventh consecutive month of decline.
  • Ongoing declines in the real estate trust balance, which has fallen continuously since June 2019. At the end of April the real estate trust balance in China was 13.6% lower than the reading for the same period last year.
  • Ongoing declines in the scale of investment by wealth management products in non-standard real estate assets. This figure saw a YoY decline of 36% at the end of April.
  • Ongoing declines in the scope of investment in real estate by banks via special purpose vehicles, with a 26% YoY drop at the end of April, for the 15th consecutive month of decline.

Analysts say that the reason for the “Five Ongoing Declines” remains the determination of China’s financial regulators to contain the “financialisation” of the real estate sector and the development of property market bubbles.

Since the start of 2020 the China Banking and Insurance Regulatory Commission (CBIRC) and its branch offices have worked with China’s local governments to issue over 130 policies for the adjustment and control of regional property markets.

Liang Tao (梁涛), deputy CBIRC chair, said that in future the authority would “uphold the position that houses are for occupation and not speculation, maintain the continuity and stability of real estate financial regulatory policy, avoid large-scale fluctuations in housing prices, and expedite the stable and healthy development of the real estate market.”

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