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The Chinese capital’s bank regulator has ordered an investigation into the illegal use of personal loans to invest in real estate amid growing fears of a property bubble.
The Beijing branch of the China Banking and Insurance Regulatory Commission told banks in the city to conduct a comprehensive examination into personal and business loans issued since the second half of last year.
They must “immediately rectify problems found and strengthen internal accountability”, according to a report by state news agency Xinhua, which cited an unnamed bureau official.
Banks will be held accountable if they are found to have allowed “illegal inflows of consumer loans and loan funds into the real estate sector”, the report said.
The investigation follows a similar move by the Shanghai financial authorities this week. Strong sales in some cities in recent months have raised concerns among policymakers that the real estate market might be overheated, prompting new measures to control funds flowing into the sector.
The Shanghai office of the banking commission said that banks should strictly scrutinize the source of down payment funds and the solvency of homebuyers, and can only issue mortgages to individuals for sales of properties that are close to completion.
In December last year, the People’s Bank of China and the banking regulator jointly announced new caps on banks’ exposure to the property sector and mortgage lending.
The new regulation came amid an increase in the share of property lending in overall bank loans and recent signs of overheating in the property markets of some higher-tier cities, according to a research report by Fitch Ratings this month.
“Property-related loans accounted for 28.8 per cent of overall outstanding loans, including a record high of almost 20 per cent from mortgages, at end of the third quarter of 2020,” the report by Fitch Ratings said.
According to a report by US rating agency Moody’s this week, property prices continued to grow in December in China. National contracted sales grew in value by 10.8 per cent year-on-year in 2020, compared with 10.3 per cent growth in 2019, largely driven by an increase in average selling prices.
Price growth in major cities like Beijing and Shanghai cities rose slightly in December, to 4 per cent from 3.9 per cent the previous month, but was down marginally from 4.1 per cent in October, Moody’s said.
“We expect national contracted sales growth in 2021 to slow amid tighter onshore credit conditions,” said Moody’s. “Contracted sales volume (gross floor area), increased by 3.2 per cent in 2020, higher than the 1.5 per cent growth in 2019, reflecting solid housing demand and the gradual economic recovery in China despite the disruption caused by the coronavirus outbreak in early 2020.
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