China's Subprime: P2P Lending For Down Payments Fuels Soaring Home Prices

One of the bull arguments about China's housing market is Chinese people all make 25% (now 20% in many places) down payments. Except this isn't true. The bank sees a 20% down payment for sure, but behind the scenes, the homebuyer may have borrowed from family, friends, or a high interest short-term lender. For example: Beijing Residents Use Consumer Credit to Speculate on Baoding Real Estate. In other cases, poorer home buyers take out high interest loans to make the down payment.

Now there are reports of P2P lending being used for down payments.
From the point of view related data and rates on personal loans product, buy a house down payment loans (including new and existing homes) and mortgage loans (such as second-hand housing mortgage loans), sellers have to sell mortgage (sellers meet temporary short-term financing needs ) and mortgage foreclosure floor (help homeowners pay off the loan principal and interest, to facilitate their selling real estate). In addition, mortgage loans and other products.

From Mortgage P2P platform, the most representative of the chain of home, family financial chain more than 90% of the data from the underlying mortgage, it is also the industry's largest mortgage P2P internet. Reporters query Homelink financial data show that in November 2015, December 5015 and January 2016, the monthly turnover was 1.41 billion, 2.05 billion, 2.52 billion, showing soaring trend. Homelink data shows in February, due to the Spring Festival holiday factors, the data fell slightly, but remained at a level of 1.71 billion.
From November to January nearly 80% growth in P2P housing loans.
Generally, the loan to buy a house down payment is not possible.
Reporters call the Guangzhou e loans president, finance chairman of the Association of Internet Guangzhou Fang Song, Song Fang said:. "Our down payment mortgage products launched more than a year ago, the interest rate is quite popular 7-9%, higher than the bank from 9 May started down the size of the loan total monthly trading volume has tens of millions, this is a fairly large amount. "

Fang Chung told reporters: "Chinese New Year holiday in February met, the property is off-season, but we still have around 30 million in down payment loans."
But in fact there are many similar products on the market.

As early as September 1, 2014, China Ping An Group's real estate business platform Ping House, launched a "good loans" down payment loans. In addition, the chain has a similar home down payment loans.

"In the future, the P2P industry will have more and more down payment mortgage products." Fang Chung said.
21CBH: P2P房贷金融链条调查:个人房贷产品规模飙升 业内竞逐首付贷

Elsewhere, one economist defends P2P are real estate agency loans saying, 不要妖魔化了链家 (Don't Demonize Homelink). He's referring to the unfolding story covered in Nexus of China's Credit and Housing Bubble: HomeLink's Two Week High Interest House Flipping Loans Funded From Own P2P Finance Platform
Currently part of the down payment mortgage really similar to the current US subprime, ability to pay is not enough for some families added leverage to buy housing in advance. But taking into account China mortgage default rate is the lowest, and also do not have financial derivatives (financial derivatives is the core reason for the outbreak of the US subprime lending that year), thus triggering the possibility of systemic financial risk is unlikely.

...From a market point of view, the current housing prices rose faster in some cities, there is a certain gap between house prices and purchasing power...
These P2P loans are popular in Shenzhen, where average prices are up more than 50%.

iFeng: 深圳房价持续领涨全国 2月同比暴涨72%
Reporters found that in addition to full use of bank loans, the crowdfunding, P2P, appears highly leveraged real estate loans down payment of financial products has become Shenzhen to promote new trends in housing prices.

According to the reporter, since 2015, there have been many "down payment loan" products, related loan funds may be used as a down payment on the purchase of the housing market in Shenzhen. These products are mainly sponsored by the Internet banking platform, real estate agency established small loan companies, and even banks intervene for buyers who disguised loans can be used for down payment.

Internet financial background of Sohu search and easy loan jointly launched the "down payment loans," for example, in the case of unsecured loans, "down payment loans" minimum loanable 1 million, the loan can be up to 20% of the housing price. Its processes, the platform sells the "down payment loan" package with a yield of 8-12%.
If down payment loan P2P products are being offered to investors at an 8% to 12% yield, the borrowers are paying mid-to-high teens in interest, and with costs, it comes to near 20% interest per annum. Investors can put up as little as 1000 yuan to invest in these loans.

Another article on the topic from Sina discusses the costs: 首付贷资金多来自民间 或通过P2P让个人投资者承压. It says the total cost of these loans runs about 20%.
Term loan interest according to different lengths and not like, generally a period of about 6 months, 12 months, compared with 8% to 10%, 2-year period from 10% to 12%, three-year period at around 13%. So calculated, borrowing costs down payment loan of about 20% in the year, has thus "down payment usury" is very hot. "Rising cost of capital will gradually transfer to the real estate market, resulting in a marginal increase in the price of real estate transaction costs." A real estate category Internet financial executives a platform to the "First Financial Daily" told reporters.

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