Chinese Households Rapidly Increase Leverage; Depreciation Pressure Will Rise

Household balance sheets are taking a turn for the worse as leverage increases sharply amid a new housing bubble. Consumer rebalancing becomes more difficult as households use their balance sheet to digest the existing housing stock.

East Money: 争议杠杆楼市3万亿个贷助推房价 楼市加杠杆or去杠杆？

National balance of individual housing loans have gone up. By the end of 2015, the balance of individual housing loans has reached 14.18 trillion yuan in 2015 to date is more than 3 trillion yuan added, accounting for about 20% of the total.

...The central bank recently released data show that as of the end of 2015, the balance of individual housing loans was 14.18 trillion yuan, accounting for 15% of the total 93.95 trillion of the total credit.

　　Although the overall look is not high proportion of a loan, but the situation in 2015, the loan total blowout. 2015 annual new loan 2.66 trillion yuan, up 23.2 percent over the previous year, an increase of 936.8 billion yuan, accounting for the year new loans 11.72 trillion 22% of the total.

This means that only in 2015, the new loans accounted for a 18.75% of the loan balance; that is to say, in 2015, new mortgage loans accounted for more than 20% of mortgage lending over the past 20 years (1995-2015), nearly four times the average annual growth in volume, it is popular, "buy a house in one year takes four years of money."

...Sudden outbreak of a loan and credit policy obviously change. Further statistics show that this round of loan spurt began in 2014, 9.30 New Deal. The end of the third quarter of 2014, loan balance growth dropped to 380 billion nearly three-year low, but the fourth quarter of 2014, loan balance growth began to rebound sharply, to the third quarter of 2015 reached 810 billion high; its share of credit outstanding increase the proportion of 19.56% from the third quarter of 2014, rose to 24.26 percent in the third quarter of 2015, in December 2015 it soared to 40%.

How long can China's leveraging continue? About 3 years says the optimist, while the more conservative view sees leveraging much higher as a result of the emergence of down payment loans.

Total 14 trillion mortgage is high or low? Over the past more than a year mean that a substantial increase in loan risk? The current property market is to continue to increase leverage or deleveraging?

Zhou Xiaochuan pointed out that "China individual housing loans accounted for the proportion of total bank loans is relatively low, there are many countries personal loans, particularly housing loans may total 40% -50% of the loan, and only ten percent of China the ratio is relatively low. Therefore, the banking system also felt personal housing mortgage loans is still relatively safe products, there are opportunities for growth. "

Well, the opportunity to develop how much? CITIC SecuritiesWe believe that the leverage ratio of Chinese residents actually lower in 2015, the year new individual housing mortgage loans is only about 30% of real estate sales. In the next year to increase the percentage of 8% to calculate, when mortgage lending accounted for 70% of sales for the residents to buy a house loans dependence peak, the rapid population increase leverage trend can be maintained for more than 3 years.

But Zhang Dawei [Centaline] pointed out that, purely commercial housing to count, in 2015 a loan accounting for about 40% of total sales, already high, this is an average figure, which the full amount of the purchase of 70% of the loans have; and if a loan account to 70% of total sales, it signals the emergence of zero down payment. Externally it is included in the credit derivatives products such as subprime, it reaches 70%.

Dawei that truly benign, healthy housing needs should receive credit support, credit support performance at a reduced rate rather than just reduce the down payment, otherwise, a zero down payment or a down payment will make a lot of people to become qualified lender, the subprime crisis is therefore rising.

For years, I had been expecting the Chinese yuan would depreciate due to massive credit growth. Now credit growth is back. Rampant inflation in credit and money supply amid a slowing economy turned into another speculative housing bubble.

In 2015, the government was forced to acknowledge the outflow pressure created by domestic inflation and exacerbated by deflationary forces in offshore dollar markets. In less than year, the country has added yet more credit, greatly increasing the the odds of and size of the coming adjustment.