Chinese banks are increasing their lending share to mortgages. In July, mortgages were responsible for all new lending at banks. At the same time, the surge into mortgages comes as leverage is also soaring. These aren't the home loans of even 5 years ago when credit made up 17.3 percent of home sales, but instead has climbed above levels seen in the U.S. housing bubble. See Chinese Banks Increase Mortgage Lending Amid Rising Leverage and NPLs and China Mortgage Lending Grows 32.2pc in 1H 2016, Leverage Soars.
Property risk alertiFeng: 房价“泡沫”风险堆积 2017年或将集中爆发
From the current situation, especially in the past year since the market is very hot in the first half of this year, including a lot of money is still in bank funds through various channels into the real estate industry , the short-term capital chain housing prices are still supported. But insiders warning, in 2017 the real estate market risk is likely to focus on the outbreak, particularly noteworthy is that first- and second-tier cities may not be spared.
The industry said that in recent years, housing prices return to a focus on first- and second-tier cities was evident, and this is the main reason for first- and second-tier prices only rise, not fall, but with the depth of the development of the project, and the expected tightening of capital changes, first- and second-tier cities will also find it difficult to escape the downward trend in prices, "This is like 20 years ago in Tokyo, Japan, everyone agrees that the land is very expensive, that it can not decline in value, but in fact, Tokyo home prices were nearly cut in half." he Said.
In the price "bubble" at the same time, a high level of personal mortgage loans also means that the risk of personal leverage is accumulating. Haitong Securities analyst Jiang Chao said that the current Chinese residents purchase commercial loan leverage ratio is about 42%. "July domestic RMB incremental loans reached 463.6 billion yuan, of which residential long-term mortgage loans was 477.3 billion yuan, accounting for the proportion of total credit exceeded 100%." He said that if mortgages maintain the current growth rate of 25% to 30% level, then the mortgage to income ratio will reach the United States and Japanese levels in one to two years and by 2020 reach the record high level seen just before the U.S. subprime mortgage crisis.