Shenzhen's Banks Asked to Tighten Mortgage Loan Standards

  • PBOC Shenzhen branch research unit unveils tightening measures
  • Banks should “appropriately control” the size of home loans

A research unit of China’s central bank branch in Shenzhen asked commercial banks in the city to strengthen risk-control practices on household mortgage loans as property prices have soared, according to a statement obtained by Bloomberg News.

Mortgage leverage in Shenzhen has been far higher than in other first-tier cities since 2015, and has accumulated risks, according to the statement from the Financial Society of Shenzhen Special Economic Zone, a research unit under the local branch of the People’s Bank of China. Banks should “appropriately control” the total size of home loans and decide mortgage rates in a prudent manner, and shouldn’t cut them to compete for clients, according to the statement, which said the measures are effective March 28.

Residential home prices in first-tier cities including Beijing, Shanghai and Shenzhen have surged amid monetary stimulus from the central bank and a relaxation of housing curbs intended to boost real estate investment. The recovery in China’s property market accelerated last month, with prices rising in the most cities since March 2014, according to official data. Prices in Shenzhen have jumped more than 50 percent over the past year.

Shenzhen Boom

The housing boom in Shenzhen, a southern business hub that borders Hong Kong, showed no sign of abating last month, with prices jumping 3.5 percent from a month earlier, the quickest among all cities monitored by the government, and leading to a 57 percent jump from a year earlier. 

The central bank research unit in Shenzhen, in the statement, also asked banks to not lend to any buyer who has borrowed mortgage loans twice in the past two years, or to those that have obtained credit for down payments from small companies or peer-to-peer lenders. They also said banks should control the down-payment ratios for high-end apartments and strengthen their examination of buyers’ debt-paying capacity.

The city has made moves to curb the housing boom, including increasing the appraisal values used to determine sales taxes and fees on property transactions starting April 1, the Shenzhen Real Estate Broker Trade Association said this month. The measures will raise costs for home transactions.

Shanghai, China’s financial center that’s trailing Shenzhen in a home-price surge, is likely to announce additional measures soon to stem a surge in property prices in China’s financial hub, a person with knowledge of the matter said this week. Potential regulations being considered include increasing down-payment requirements for some second-home purchases to 70 percent and tightening the criteria for non-locals to buy homes in Shanghai, said the people.

Calls to the Shenzhen unit’s office and the Shenzhen government went unanswered.

— With assistance by Heng Xie, and Emma Dong

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