Chinese Banks Follow Through on Mortgages for Rent as Central Bank Ditches Market Currency

When has increasing credit access made something cheaper? Never, as far as I can tell. Whenever the government says it wants to make something affordable, prepare for a surge in prices.

The rental market in China is no different.

Back in June Chinese media covered Beijing's latest solution to the housing bubble and soaring home prices: mortgages for renters. See: The Final Stage: China Copies U.S. Housing Bubble Policies. Banks planned to lend at sub-market rates to encourage rentals.

Fast forward two months. Central Planning Goes Haywire: Beijing Rents Soaring Turns out government targeting of rental properties caused real estate firms to pile in and renovate existing properties, hiking up rents in the process. Also see: Central Planning 101: Blood-Sucking Realtors! The Rent Is Too Damn High!

No worries though! Banks are here to make housing and rent even more affordable with more loans for rent!

Caijing: 多家银行进军住房租赁市场
In recent years, the state has launched a number of initiatives to vigorously promote the development of the housing rental market in order to promote the “rental purchase and purchase” of the housing market in China. According to a report released by the Chain Institute, by 2025, the size of China's housing leasing market (total rent) will jump to 3 trillion yuan.

Faced with a broad market, since last year, many Internet organizations and many well-known real estate companies have entered the housing rental market. However, among the new market participants, the “Banking System” is very eye-catching.

Mr. Gu, who works in Guangzhou, has been renting for 1 year in Suide Road, Baiyun District. Since the move last year, the price of renting houses has been rising, and the house rented by Mr. Gu has been locked for three years. “One year ago, I signed a long-term lease agreement of RMB 48,000 with the owner through the platform launched by CCB, and paid a one-time rent for three years, and the rent enjoyed a 5% discount.”

It is good to be able to lock in rents, but the three-year rent is also a small expense. However, Mr. Gu is not worried. “I borrowed 75,000 yuan from CCB. The monthly repayment pressure is not large. After the preferential rent and loan interest are offset, it saves more than 1,500 yuan.”
Banks make money coming and going because they're also leasing the property from the owners:
In April of this year, Ms. He, a citizen of Guangzhou, “saves” 120 square meters of unused housing to CCB. The lease period is 6 years and the rent is 500,000 yuan. "Compared with the rental price, I value the safety of the bank. I have to rent for 6 years at a time. I don't have to worry about issues such as follow-up management."

“The services of some housing leasing agencies are gradually alienating, and the use of rent maturity mismatches to form a 'fund pool' has brought hidden dangers to the long-term rental market.” An intermediary said that banks entering the leasing industry can allow “markets to return to the market”. , financial return to finance." Financial affairs can be done by more professional institutions, and intermediaries can become more pure.
But not everyone is down with the plan. The officials in Wuhan are warning residents against long-term contracts because developers might use them to disguise property sales...because 20 years of rent is effectively a 20-year mortgage.

Caijing: 武汉:租赁住房单次租期不超20年 不得一次性收取5年以上租金
According to the regulations, in the future, all new rental housing units in Wuhan should be used for leasing. They should not be sold on a rent basis. The single lease period for external leases must not exceed 20 years, and no one should pay more than 5 years of rent at one time. Other ways to sell in disguise.

The regulations also pointed out that the development and construction units should strictly follow the land transfer contract agreement and the project design documents to fully construct the leased housing to ensure that the construction progress of the new (matching) construction of the leased housing does not lag behind the other commercial houses on the plot for sale; in principle, new ( The allocation of rental housing should be relatively concentrated, according to the layout of the building.

At the same time, in the first phase of the commercial housing project to be developed in phases, it is necessary to ensure that the new (allocated) leased housing and the corresponding supporting infrastructure and public facilities will be started simultaneously and delivered simultaneously; the newly built and leased housing will be small and medium-sized ( If the commercial housing development project obtained through bidding and auction is approved to be converted into rental housing, it shall not be transferred within 10 years.
State-owned banks in Guangzhou are doing what Wuhan's government warns against.

All of China's central planning points in one direction: yuan depreciation. And with yuan bears growing in number, it's no wonder the central bank threw yuan internationalization under the bus.

Bloomberg: China Signals Tougher Yuan Management at Expense of Market Role
China signaled tougher management of the yuan, dropping a phrase underlining the importance of market forces from a key policy report for the first time in five years.

The People’s Bank of China cut its pledge to allow "market supply and demand to play a bigger role in deciding the exchange rate" from a section on future tasks in its third-quarter monetary report. The last time that phrase wasn’t used was in the fall of 2013. Policy makers will take steps to ensure the yuan is basically stable at reasonable and balanced levels, according to the report published late Friday.
All this will do is exacerbate outflow pressures, domestic inflation and economic distortions. The wheels are coming off.

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