Buyers, banks must face property risks

Recent months have seen housing prices fall in cities across China. Some buyers in Zhejiang, Jiangsu and Fujian provinces have even been sued for failing to pay their mortgages.

When housing prices go down, some buyers will find themselves with loans that exceed the value of their property. In general though, this is nothing for the public to panic over.

Actually, China's central bank and banking regulator have both issued prior warnings to prospective home buyers about the dangers of getting in over their heads with mortgage loans. Such warnings though weren't enough to deter some from taking risks in the market.

As urban home prices continue to soften, it's not just developers and buyers who should be taking note. Commercial banks need to brace for further market cooling. These institutions should raise their approval criteria for mortgage seekers.

For buyers, the possibility of housing depreciation is real. Those who default on their home loans will not only lose their property and their initial payment, they will also have a bad credit record that might hound them for the rest of their lives.