2004 China Real Estate Finance Report

Author: Research Bureau of the People's Bank of China, Real Estate Finance Analysis Group
Publisher:
Publish Date: 2006-03-01
Features: In 2004, housing sales prices rose rapidly, but the growth rate of land prices declined, and the growth rate of real estate development investment further slowed down. The supply ratio of low- and mid-priced, small and medium-sized housing units was relatively low. The demand for investment in housing grew rapidly, with some foreign capital flowing into the real estate markets of hotspots in China. A large amount of land had been transferred, but the development progress was slow. The growth rate of funds invested in real estate declined, but the growth rate of real estate loans was high. From the perspective of loans to real estate developers, although loans for real estate development, such as those to government land reserve agencies, grew rapidly, the growth rate of loans for housing development had been continuously declining since 2004, leading to a slowdown in the growth rate of loans to real estate developers. From the perspective of personal home purchase loans, the growth rate, although slowly declining, still remained high. Personal home purchase loans exhibited the following characteristics: first, they were concentrated in a few key cities and hotspots; second, personal housing provident fund loans grew rapidly; and third, the non-performing rate of personal home purchase loans was low. Under the correct leadership of the Party Central Committee and the State Council, the People's Bank of China, based on changes in the macroeconomic situation, played a full role of credit policy to support the sustainable and healthy development of the real estate industry. It flexibly adjusted the interest rates for real estate loans, strengthened the management of policy-based real estate finance such as housing provident fund loans, and promoted the innovation of real estate financial products. The support of real estate financial policies for the real estate industry and the service level had been significantly improved and enhanced. The prevention of real estate financial risks had been further strengthened. The current real estate financial risks were concentrated in the following aspects: first, market risks due to overheated real estate markets in some regions; second, financial risks due to high-leverage operations of real estate developers; third, ethical risks highlighted by "fake mortgages"; fourth, operational risks in local banks when issuing real estate loans; fifth, significant credit risks in land development loans; and sixth, increased legal risks in real estate loans. To support the healthy development of the real estate industry and play its role as a pillar industry, it is necessary to adhere to the principle of focusing on key areas and treating different cases differently, using tax measures to restrict speculative housing purchases and short-term speculative activities. It is important to promote the concept of saving in housing consumption and encourage the consumption of small and medium-sized housing units. Strengthen the construction of low-rent housing for urban residents. Take a resource-saving path in the development of the real estate industry, advocating land conservation, energy conservation, water conservation, and electricity conservation, and paying attention to environmental protection in the development and consumption of real estate. To promptly prevent and resolve real estate financial risks, commercial banks should strengthen the review of real estate developers, avoid mortgage operational risks, prevent "fake mortgages," improve punitive mechanisms, and strengthen interest rate risk management. Improve the housing mortgage guarantee system and further study and formulate mortgage insurance systems.