Measures to rein in real estate continuing

A Chinese bank has reportedly suspended home equity loans in Beijing, as such loans have came under strict scrutiny by officials in their efforts to rein in the overheated real estate market.

China CITIC Bank suspended the issuance of its home equity loans of over 2 million yuan ($316,100) in Beijing to better comply with the regulations, Chinese media reports said on Wednesday.

(Photo: Xinhua)

The bank's sales department said later on the same day that the move "will not influence the normal credit demand for home purchases," according to a report by  China Business Network on Wednesday.

"Home equity loans are mainly applied via mortgages of individual properties for the purpose of business operation and consumer purchases, but they can also serve as an alternative funding channel for buying homes, especially for those who have stable incomes like civil servants and teachers," Yan Yuejin, a research director at the Shanghai-based E-house China R&D Institute, told the Global Times on Thursday.

The bank also said that it will strictly enforce the government's regulations for the real estate market, and ensure that the loans in Beijing are used for business operation and living expenses rather than illegally flowing into the real estate market. 

"Offering home equity loans has been one of our major businesses, and all the relevant services have been halted because we found that some of the loans were used for property speculation," a member of staff at the bank who wished to remain anonymous told the Global Times on Thursday.

China CITIC's semi-annual report released in August 2017 showed that the bank has been increasing its efforts in the personal mortgage loan business, with its new personal house mortgage loans during the period reaching 62.3 billion yuan, accounting for 29.23 percent of all its new loans.

"The suspension may also have been caused by the bank's decision to optimize its loan structure, since it may choose to tighten credit in the first half of the year," said Yan.

"Nevertheless, [the suspension] will only happen among small and medium-sized banks like CITIC, so it will not have a major impact in the industry," Yan noted.

In 2017, China imposed stricter regulations on home purchases as part of its move to curb asset bubbles and financial risks and the China Banking Regulatory Commission also pledged to clamp down on the use of consumer loans to purchase houses in an annual work meeting in January this year.