New mortgage loans in Shanghai slumped 98 percent last month as the central government imposed measures to curb property speculation, deterring investors from purchasing homes.
According to the Shanghai branch of the People’s Bank of China, home loans fell 11.4 billion yuan ($1.68 billion) to 270 million yuan. This is 91 percent lower compared to the July figure.
Recently, banking regulators reiterated measures to cool the property market, including ordering mortgage lenders to stop offering third-home loans in areas with “excessive price gains”, as well as raising mortgage rates and minimum down payments for multiple-home buyers.
Oscar Choi, a Hong Kong-based property analyst at Citigroup Inc, told Bloomberg: “It’s no surprise that the number of mortgages dropped so much in Shanghai because the sales volume has slumped.” He added that “banks do not dare extend loans for homes in the face of the government’s tightening measures.”
A government survey showed that property prices in the country stalled in July, while transaction volumes dropped 29 percent from the previous month. Banking regulators ordered banks to determine the possible impact of the 60 percent decline in property prices, said a source with knowledge on the issue.
Meanwhile, the central bank said in a statement: “Because of recent policies on the property market and low transaction volume, individuals’ demand for mortgages continued to contract.”
Sales of new homes in Shanghai dropped 11 percent to 137,000 sq m last week, according to property consultancy firm Shanghai UWin Real Estate Information Services Co. Home supply also fell 36 percent to 97,000 sq m last week.
Around 5.74 trillion yuan worth of mortgage loans were recorded by Chinese banks in the end of June, a 48.8 percent increase over the same period last year, according to the quarterly monetary report of the central bank.