Housing News
- Property financial products mulled
Date: 18-Dec-2007 Sources: (Shenzhen Daily)
THE government was considering a trial of securities backed by commercial property mortgage loans, People's Bank of China Vice Governor Liu Shiyu said in a speech published in the Financial News yesterday.
Liu said the government would continue to promote innovative financial products in the real estate sector, despite the problems in the U.S. subprime debt market, to make property loans more efficient.
China's outstanding property loans totaled 4.69 trillion yuan at the end of October, a 31 percent increase from the same time last year. That accounted for 18.02 percent of total yuan loans issued by the country's financial institutions at the end of October, Liu said.
He didn't give details of the planned trial of the mortgage-backed securities in the article, which was a transcript of a speech he made Tuesday at a meeting to discuss commercial property credit management in China.
China Construction Bank is the only mainland commercial bank to have launched mortgage-backed securities so far on the mainland, and these were backed by residential mortgage loans.
Liu said recent events in the global market had shown that excessive lending could cause bubbles in property markets, which could lead to financial and economic instability.
The excessive liquidity could also lead to the inflow of speculative funds, particularly for countries with currencies that face appreciation pressure, he said. Speculative funds had kept flowing into the property markets of these countries, he said.
Liu urged commercial banks with a nationwide network of branches to finalize detailed rules on property credit management as soon as possible, and said all property lending must be based on these rules.
Tuesday's meeting came on the same day that the central bank and banking regulator said in a joint statement that they would step up their management of property lending.
The central bank clarified rules on residential mortgages that will make it easier for families living in small apartments to buy a second home. It said families with living space below the local average per person can apply to take out a mortgage to buy a second home on the same terms as for a first home.
In September, the central bank raised the required down payment for a second residential property to at least 40 percent. Before that, it had been the same as the minimum down payment for a first property, at 20 percent or 30 percent, depending on the size of the property.
The central bank said applicants for second-home mortgages had to provide documents supplied by local authorities on the size of their homes.
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