Down Payment Loans Decline in Beijing, Shenzhen Investigates, Will Home Prices Fall?

Some Beijing realtors have stopped down payment loans as the government begins to collect data on the industry.
In addition to Beijing, the news that the Shenzhen Municipal Finance Office also issued a notification, require in Shenzhen P2P, small loans companies involved in crowdfunding to buy a house, "down payment loans," or other diagnostic investigation involving highly leveraged mortgage situation, and "sort out relevant companies list, the number of product models and related to finance."

...Affected regulators investigation, some real estate agents have begun to adjust the business. Beijing Chinese Commercial News reporters Zuo Ricong and Mou Zhongjie bodies are informed, the agency has stopped a new house down payment loan business at the end of February.

But in addition to the real estate agency, most of the down payment loan business did not stop. Room Service to gold in the Beijing Daily reporter said that their down payment and loan business without a pause. In addition, the down payment loan business Beijing several P2P platform also continues.
iFeng: 北京摸底楼市配资 部分房产中介停止首付贷

The government is only now beginning to investigate down payment loans and stopping them will require a robust regulatory response, which may not be enough to stamp out the practice:
Centaline Dawei, chief analyst, said in the end the loan down payment against the non-compliance can not say, but similar down payment loan business must be regulated to be healthy development.

Whether or not the down payment mortgage products should be directly stopped? Dawei said that if property prices have been rising, the next surface banned down payment loans, will continue to exist in secret, especially P2P industry down payment loan business bad regulation, it is recommended to regulate the regulators to introduce relevant measures, such as providing the highest percentage of down payment loan , time period, etc., such as down payment loans three month period can be done if there is a risk too long.
SCMP: China’s top policymakers team up to rein in home prices in first-tier cities
As leverage risks increase in the housing markets in China’s first-tier cities, Shenzhen is taking the first steps to scrutinise and regulate local margin financing.

The city government said in an urgent notice on March 4 the housing market was overheated and local internet finance and microfinance operations would have to submit the latest data on their margin finance to Shenzhen homebuyers by Wednesday. That included loans to cover down payments, crowdfunding and other highly leveraged financing products, the mainland’s Securities Times reported on Tuesday.

“We will further study the finance risks of leveraged loans among new financial institutions,” the government said.

By Tuesday, leading mainland property agencies include Lianjia and 5i5j had stopped offering down-payment-related financing products, Securities Times said.
China Daily: Guangdong probes firms giving credit to property buyers
The credit covering Shenzhen homebuyers' down payment could be as large as over 2 billion yuan ($306.9 million) through small loan companies and peer-to-peer (P2P) lenders, said the newspaper citing initial result of the probe.

Guangzhou, capital city of Guangdong province, is also inspecting the leverage condition of down payment, and some local banks have either lowered mortgage amount or shut out applicants with poor credit rating, sources told the paper.
A Chinese article asks, will home prices fall as a result?

iFeng: 狂飙楼市遭遇首波寒潮 房价会降吗?
Down payment loans pushed up the price it really?

Huatai Securities chief analyst Xie Haoyu real estate industry argues that the agency has some guided down payment mortgage rates accelerator effect, but not dominant. Xie Haoyu said down payment loans to housing transactions basis, so the down payment mortgage intermediaries will facilitate transactions for the purpose of any asset price rise brought prices will rise after the volume, which is the relationship between supply and demand decisions, if this Transactions focused on the release in the "threshold" come down, it will bring short-term reversal of the relationship between supply and demand and thus push up prices, due to the current domestic offer loan down payment almost all intermediaries and to deal for the purpose, so there is a certain accelerator effect.

However, not down payment loans will decide a rate change, as already mentioned, the down payment loan has begun to appear a few years ago, while the price also began to rise in 2015, and had no down payment loans popular. Therefore, Xie Haoyu believe housing prices have monetary reasons fundamentals.

CITIC Securities research report also said that in recent years various types of down payment mortgage has indeed been relatively fast development, become climate in some places Shenzhen, but compared to "off-site with the capital" and the entire property sales volume called the property market is still very small.

First, the current mortgage lending% of sales is still relatively low. As we all know, any down payment loan interest rate to be much higher than mortgage loans. If you can mortgage, buyers do not usually consider the down payment mortgage. Now that mortgage percentage of sales are not high, it is difficult to imagine a large number of residents of homes with various types of mortgage loans to buy a house down payment mortgage products.

Secondly, to provide down payment loans, many are some of the listed companies. However, periodic reports of listed companies has not experienced huge enough to affect the entire real estate market down payment mortgage products.

Finally, the first-tier cities of the property market itself, there are constraints residents with mortgages factors. For example, in Beijing due to the personal income tax collection requirements, so a lot of second-hand housing transactions down payment account for a high proportion of the total contract price - once people choose to buy more mortgage payments, it is likely to cause the tax burden to rise. Source: China brokerage

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