2018-08-02

China Escalates War Against Housing Speculators, Early Mortgages Repayment Penalty Increases

8 Times in 9 Days! blares the headline. It's unprecedented! Top officials have mentioned real estate control 8 times in the past 9 days. They're going to war with speculators.

iFeng: 最强烈信号!9天8次重磅调控:四大一线城市参战房价还敢涨?
In order to seize the impulse of rising house prices, the central government, various departments, and localities can be said to be painstaking. From top to bottom, just 9 days, 8 times heavy mention of real estate regulation, unprecedented.
Yes, unprecedented is a good word for what Chinese cities are doing now. Exhibit A is Suzhou:
From August 1st, if a home buyer in Suzhou pays a mortgage in advance within 5 years, he will be required to pay penalties! In response, local banks, ABC, ICBC and CCB in Suzhou all responded: the news is true, and the new rules for “penalties” will be implemented from August 1.
I translated this as penalties because that's what it is, but the word used is actually the Chinese term for breaking a contract or default. What's surprising is that this rule wasn't already in place for speculative buyers because it deters people who are violating the spirit of their mortgage contract (presenting themselves as a home buyer when they're really a speculator).
According to the formula of network transmission, the liquidated damages = the amount of early repayment × the monthly interest rate × 6, that is, repay 100,000 in advance, 2,940 liquidated damages, pay 1,000,000 in advance, pay 29,400 yuan in damages.

"This part of the commercial banks in Suzhou has given a standard for early repayment of loans, and is actively involved in the implementation of real estate control policies. Although there are no formal documents, the credibility is very high. Such policies have no effect on the purchasers of loans. And for some groups to be replaced or sold real estate, there will be a little impact." Yan Yuejin, research director of the Yiju Research Center think tank.

In the existing housing market in Suzhou, the phenomenon of loans less than 5 years and early repayment is very common: the landlord usually needs to settle the house loan on the handle before it can be transferred.

The reporter learned from the Beijing intermediaries the first time, in advance in Beijing, it is also necessary to pay damages! However, the general contract stipulates that the payment must be paid in advance within 1 year.

Therefore, this time Suzhou has extended the prepayment time to 5 years, and the regulation is very obvious. According to analysis, the important point of doing this in Suzhou is to prevent the real estate from being cashed out.

"From the perspective of policy content, the advance repayment part is related to the practice of real estate cashing, and the bank collects the prepayment repayment penalty, which is the effect of forming a similar restriction on sales, that is, the time for holding the house will be longer." Yan Yuejin said.
Mortgage rates are also rising.
Since 2017, the national mortgage interest rate has been continuously raised, ranging from a 20% discount on the benchmark interest rate to a 20% or 30% increase. Mortgage interest rates continue to rise in an effort to curb unreasonable demand for home purchases.

The reporter learned from a number of institutions such as Rong 360 that most of Beijing's bank mortgage interest rates are 15-20% higher than the benchmark interest rate. In other second- and third-tier cities, the mortgage interest rate is more obvious. In some places, the interest rate of mortgage loans has risen even to 40%-50%.

Mortgage interest rate for 35 city average (black line) and four first-tier cities.
Within four days, the four major first-tier cities "rapid kill" property market changes

Counting down, in just 9 days, from the central to the local, a total of 8 references to real estate regulation.
On the night of the news meeting of the Political Bureau of the CPC Central Committee, a real estate company executive could not help but sigh in the circle of friends: the meeting set the tone for the real estate control policy in the second half of the year, and the financial release of water seems to be inaccessible to the real estate market.
Let real estate speculators "unprofitable"

This round of real estate regulation since October 2016 has returned the housing prices of the four first-tier cities in the north, Guangzhou and Shenzhen. Since the beginning of this year, the prices of the four major first-tier cities have been stable. Although real estate speculation is almost “unprofitable,” The heart is like a ghost, still lingering in various cities.

The year-on-year price of second-hand houses in Beijing has experienced a negative growth for nine consecutive months from October last year to June this year, and the chain has also maintained a negative growth for nine consecutive months. Shanghai second-hand housing prices also fell for eight consecutive months.

According to the China Index Academy, the average price of housing in the top ten cities (Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Wuhan, Chongqing, Nanjing, Hangzhou, Chengdu) in the first half of this year has increased by only 0.98%.

In the investigation of the Financial Street area in Beijing, an intermediary manager told reporters that one of the real "real estate speculators" Yang Hua (a pseudonym) he had known had earned a huge increase in housing prices from 2015 to 2016. One stroke. Before the National People's Congress in March this year, Yang Hua tried to buy a house (average price of about 100,000 / square meter), gambling real estate control policy loose, can be described as "the heart of real estate speculation" does not die.

Fortunately, the national and Beijing real estate regulation and control policies have not only not relaxed, but also become more and more detailed and tighter. Beijing has also introduced targeted regulation for the so-called “school district concept” sales.
We'll soon find out if it works.

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