Home mortgage rumors fall flat with experts

Illustration: Lu Ting/GT

Easier borrowing for existing property owners unlikely to bolster market

China's Big Four banks reportedly denied rumors Tuesday that residents can be considered as first-time home buyers if they have repaid their earlier mortgage loans. Despite this assertion, many within the public see it as a foregone conclusion that banks will soon ease restrictions on mortgage lending. The Global Times interviewed four experts to get their views on what the future has in store.

Xue Jianxiong, senior real estate analyst with E-House China

Although China's Big Four banks denied rumors that they will relax restrictions on mortgages for home buyers who have repaid their previous loans, some small and medium-sized banks have reportedly lowered home loan requirements for those who have already repaid one mortgage.

Even if banks relax restrictions on mortgages, it will not bring about huge changes to the current housing market. It's true that some home buyers will qualify for a mortgage after the restrictions are relaxed. Some might be able to buy a second home. But these people represent only a fraction of potential home buyers in the country.

China's economic growth has slowed. Under current circumstances, it's difficult for the housing market to grow rapidly over the short term.

Some say that relaxing mortgage restrictions will boost home buyers' confidence in the market, but such measures are insufficient to make much of a difference.

Shaun Brodie, head of China Strategy Research at DTZ

As more people move to cities to seek work, many might be in a position where they have already paid off a loan on a home in their hometown but they would like to buy a home in the city where they work. Easing mortgage policy will certainly help out these individuals in the future.

The mortgage interest rate is key as it affects the monthly repayments a home buyer who has taken out a loan has to pay back to the bank. The higher the mortgage interest rate is, the greater the monthly loan repayment is and so the longer it would take an individual to pay off an overall loan.

Thus, if the mortgage interest rate is higher than usual, it will deter many buyers from entering the housing market and will in turn dampen market sales volume. Buyers are acutely aware of the mortgage interest rate level and any downward adjustment will certainly be beneficial to the regional housing market as it will spur more buyers to take the plunge and purchase a residential property. If the mortgage interest rate is cut sufficiently, I expect to see residential transaction volumes begin to increase in many cities.

Deng Yongcheng, an associate professor specializing in real estate marketing at Shanghai University of Finance and Economics

I think China's central bank is signaling it is willing to relax restrictions for mortgages to give more people an incentive to buy homes now. Home buyers can qualify for lower interest rates and smaller down payments if they have paid off a previous mortgage. These incentives are the same ones offered to first-time home buyers. The goal is to boost demand for homes and shore up the real estate market.

However, it is unlikely that relaxed restrictions will have much of an effect. It is now inevitable that property prices will fall. Relaxing mortgage restrictions won't reverse this trend, just like loosening restrictions on purchases haven't worked.

Broad loosening of mortgage restrictions may also be at odds with the central government's reform agenda. The government has been trying to promote China's economic transition so the economy doesn't need to rely so much on the real estate sector to drive growth. Excessive stimulation of the real estate market will just set China back on the same old road of property speculation and local governments funding themselves with land sales.

In addition, property speculators may take this opportunity to invest in the property market. Higher house prices will impose a negative effect on home buyers' demand.

Liu Yuan, senior research manager at Centaline China Real Estate

As many know, the current mortgage restrictions for home buyers went into effect two years ago to curb the insane rise in housing prices. But now that the housing market has turned sluggish, policies should change as well.

It is possible that commercial banks will loosen restrictions for home mortgages around the country. But the proportion of home buyers who will qualify for such mortgages is tiny.

Loosening mortgage restrictions might help boost housing sales a bit, but it cannot change the housing market as a whole. Developers will still need to offer customers more incentives, such as lower prices, to increase sales.