Homebuyers go online to finance down payments

Peer-to-peer services gain favor among those who want to buy apartments, reports Bloomberg.

Qian Kaishen and his wife almost gave up on buying a bigger home in Shanghai in August.

As apartments at Shanghai Villa, a project they liked near the city's Hongqiao Airport, started selling, the money they had saved for the deposit was tied up in a 5 percent return investment.

Then property agency E-House (China) Holdings Ltd offered them a one-year bridging loan of 280,000 yuan ($45,540) at zero percent interest. The loan came from online investors through E-House's Internet finance website. It covered about half the down payment and was just enough to make up the shortfall.

"Now we're good both on our investment and home purchase plan," said Qian, 31, who works for a local logistics company.

"We would have given up if it weren't for the loan. I don't like borrowing from my parents or relatives, especially because we have the money."

E-House is joining peer-to-peer lenders to finance down payments for buyers struggling to put together a deposit after home prices tripled since 2000. Mortgage lending remains tight, even after the central bank eased its policy in September, as banks anticipate an extended property market decline because of a high supply of housing, according to Standard Chartered Plc.

Home prices in the Chinese mainland are now equivalent to 40 years' average income for an apartment of 100 square meters. That compares with 26 years' median income in New York for an apartment of the same size.

The average price of a typical (84 sq m) home in Singapore is 11 times the median household income, while that for a typical apartment in Hong Kong (50 sq m) is 14 times, according to local official data.

In the mainland, buyers need to make a minimum down payment of 30 percent for a first home and at least 60 percent for a second one before they qualify for a mortgage. The limits are the result of a four-year campaign to stem property speculation.

Those restrictions have helped drive demand for down payment loans.

"The phenomenon emerged in the past year or two largely because of mortgage restrictions and high down payment requirements," said Zhang Haiqing, a Shanghai-based research director at Centaline Group, China's biggest property agency.

The central bank on Sept 30 eased some mortgage conditions for second properties in a bid to revive the market.

"We can't exclude the possibility that as the market recovers, more people will want to buy and some of them will still have to use this channel because they don't have the money," Zhang said.

New home sales slumped 11 percent in the first nine months of the year and prices fell in all but one of the 70 cities monitored by the government in September from August.

Being able to borrow for a down payment means unqualified borrowers are getting mortgages, a practice that led to the United States' housing crash in 2007, according to Standard & Poor's Financial Services LLC.

P2P sites are clicking with borrowers	Shanghai leads effort to rein in housing market