Tighter property loans squeeze homebuyers

Potential homebuyers talk with a sales representative at a real estate fair in Tianjin, one of the cities affected by the latest round of tightened home loan policy. LIU DONGYUE / XINHUA

Shanghai, Shenzhen see biggest dips of 60 percent of transaction volume in January

Homebuyers face more pressure getting financing after mortgage lending has tightened in several major cities, in a series of measures curbing speculative buying and cooling down the overheated property market, said analysts.

Although no official circular has demanded banks raise interest rates for homebuyers, banks in Beijing, Tianjin and Guangzhou have reduced discounts on benchmark rates by some 5 percent since the beginning of this month, according to a report in National Business Daily.

In Zhengzhou, Henan province, homebuyers said banks stopped offering discounts on benchmark rates to home loan applicants in January. In December 2016, discounts of 5 percent were widely available in the city.

In Shanghai, bank staff said that their lending quotas shrank significantly since late January.

"Home loan applicants' information and financial capacities are scrutinized. Lenders across the city are more prudent as required by the risk management operation process," said Zhang Juyin, an employee of the credit arm with a Shanghai-based bank.

Jiang Chao, chief macro analyst with Haitong Securities Co, said that recent monetary policies are likely to be tightened based on recent reverse repurchase rates, a benchmark for liquidity.

The weeklong, fortnight and 28-day reverse repurchase rates have risen 10 basis points to 2.35 percent, 2.5 percent and 2.65 percent, according to data from the central bank.

Tightened lending has excluded some potential homebuyers from the residential property market in some cities, denting the already declining transaction volume.

The combined transaction volume of residential properties in 30 major cities dropped 36.7 percent month-on-month in January by space volume.

Shanghai and Shenzhen lost the most with a more than 60 percent month-on-month plunge, and Beijing followed with a 50 percent decline. Second-tier cities also lost 42 percent month-on-month in terms of transaction volume, the research note said.

Most major cities will continue to see lower transaction volumes in 2017, particularly those cities with fast growth of average prices in the past two years, said a research note from real estate services provider JLL.

"The heat is cooling and investors are becoming rational. Data in January and early February have signaled the basic tone of the residential market in 2017, with more calmness and stability," said Zhang Dawei, chief analyst with Centaline Property.

Lower-tier cities have benefitted from the spillover effects of a cooled market in major cities, as potential buyers are likely to shift to smaller cities with more relaxed policies over homebuyers' qualification, down payment requirements, and more affordable prices and favorable loan rates.

"An increasing number of residents are considering buying properties in lower-tier cities, particularly in their hometowns or key cities near their hometowns instead of in first-tier cities," said Ma Weiqi, sales manager with Yuhongda Real Estate Ltd in Hefei, Anhui province.