China’s Banks Pledge $467b In Rental Housing Loans
As property prices rocket across China, Beijing has appealed to the country’s banks and insurers to help accelerate the development of rental markets as a way of making homes more affordable – and rein in speculative sale markets.
The big state banks have responded by pledging more than 3 trillion yuan in rental housing financing, including for real estate developers, leasing firms and tenants, according to Reuters calculations. The total value of the rental market was 1.3 trillion yuan last year.
China Construction Bank Corp (CCB), the second-largest lender, is the most visible example of this trend, giving loans to renters at ultra-low interest rates with long repayment periods. CCB began offering the loans in the southern boomtown of Shenzhen in November. Under its pilot scheme, home renters can borrow up to 1 million yuan with no collateral and have up to a decade to repay their loans.
The loans have found many takers in Shenzhen, where home prices have sky-rocketed in recent years as the city establishes itself as China’s Silicon Valley with tech giants like Tencent Holdings Ltd and Huawei Technologies.
To mitigate risks, banks are considering packaging rental-related loans into asset-backed securities and real estate investment trusts and transferring risk to other investors.