Regulator warns of danger in property [EDIT: what regulators are supposed to do, namely, regulate]
biz.scmp.com
Saturday, October 26, 2002
CHRISTINE CHAN
China's banking watchdog has warned banks not to engage in excessive property lending, in the latest display of official concern over overheating in the real estate market.
"Surging prices and growing vacancy rates have increased the potential risks of the property sector," the People's Bank of China (PBOC) said in its third-quarter monetary policy report.
"Attention needs to be paid. Banks should strengthen their credit management and guard against a repeat of a property bubble."
The PBOC's move follows a similar warning in July by the construction minister and recently reported concerns from Premier Zhu Rongji that a speculative bubble had emerged in certain regions.
The PBOC said banks should "closely monitor" whether property investment and lending were growing too rapidly in certain regions.
The central bank also fired a warning shot at lenders who advance up to 100 per cent of the value of the property, reiterating its rule that home mortgages may not exceed 80 per cent of the value of a property.
The PBOC rule has been in place since 1998 but in recent months some banks have been finding ways around it.
By comparison, Hong Kong banks are allowed to lend up to 90 per cent of a property's value, relaxed from 70 per cent earlier this year.
Mainland property prices have risen strongly this year, fuelled by 486.3 billion yuan (about HK$458.8 billion) worth of investment being poured into the real estate and construction sector in the first nine months, up 29.4 per cent over a year earlier.
Official figures show average house prices rose 11.1 per cent year on year in the first half, with rises in Beijing, Shanxi and Yunnan exceeding 25 per cent.
House prices in Beijing - usually the country's highest due to robust demand and higher land-use costs - reached 4,771 yuan per square metre in June, compared with the national average of 2,304 yuan, official figures showed.
Bankers in Shanghai and Xiamen said property prices in those cities had climbed about 10 per cent so far this year, thanks to strong overseas buying and locals upgrading.
Property sales amounted to 263.5 billion yuan in the first nine months, another 31.9 per cent gain over a year ago, the bank said. Ninety per cent of sales were to individual home buyers.
However, over-investment has seen vacancy rates rise sharply in the first eight months, reaching 14.1 per cent of the country's overall gross residential and commercial floor area, the bank said.
By comparison, Hong Kong's residential vacancy rate is about 7 to 10 per cent, analysts say.
George Leung Siu-kay, HSBC chief economist for Greater China, says: "Government figures show that there is over-investment and overheating in the property sector. Excess supply and vacancy rates are relatively high too.
"Beijing is concerned that the property market is getting overheated at a time when domestic demand is slowing."
Michael Choi Ngai-min, chairman of mainland property consultant Land Power, said there were concerns that overheating could occur in some second- or third-tier mainland cities, where oversupply and weak government management could result in property bubbles. |
