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Shenzhen home buyers bugged by mortgage dilemma

By Hu Yuanyuan (China Daily)
Updated: 2008-08-04 06:36

For instance, if the client bought an apartment for 1 million yuan but the bank's evaluation is 900,000 yuan, the client can only get 630,000 yuan of mortgage rather than 700,000 yuan, she says.

According to an employee of Shenzhen Development Bank, even if the first apartment the client would like to buy is less than 90 sq m, he may still have to pay 30 percent for the first installment instead of the 20 percent as required.

"I do feel banks in Shenzhen have tightened their criteria in giving out mortgage loans and are striving to develop other types of personal loans like car loans," says Song Liang.

Chen Jie's final decision, like most mortgage borrowers now, largely hinges on the property price trend. If prices continue to fall, more will choose to default.

"The sign of a cooling down in China's property market is self-evident. The correction is still going on and may continue until the end of last year," says Li Kongyi, an analyst with Essence Securities.

Property price growth in China's major cities slowed down 1 percentage point in June from the previous month, according to the National Development and Reform Commission (NDRC). The growth rate has dropped for six months in a row. In a statement on its website, the NDRC said property prices in China's 70 large and medium-sized cities rose 8.2 percent year-on-year in June, compared with 9.2 percent in May.

"Though there is still a year-on-year growth in property prices, in some cities prices have plummeted from the peak. Given the continued credit crunch and the poor confidence of consumers and enterprises, there is still room for property prices to slide further in the second half of the year," says Chen Mingchun, a senior economist with Lehman Brothers, adding developers will also have to lower their prices to ensure liquidity.

However, Ben Christensen, head of research for Jones Lang LaSalle Beijing, believes the current wait-and-see attitude in the market does not mean housing demand is evaporating. "If the market doesn't drop as much as people expect after the Olympic Games, prices will rally again and will probably even rise."

Most developers are now betting on sales rising in September and October, normally the best time for property sales. And, the NDRC has just approved the draft design of the country's real estate warning system, covering 40 cities, which will be run by the Ministry of Housing and Urban-Rural Development.

Guo Shiping, head of the financial institute of Shenzhen University, says the peak of mortgage crisis may really emerge at the end of the year as it usually takes people nearly one year to decide to stop paying mortgage after the property market began to slide.

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