Don't underestimate the amount of property loansby ANDREW WONG WAI-HONG
Recently some articles have had comments that although China's house prices are a bubble, it will not burst.
Before we start to discuss this question, I want to discuss another more familiar situation in the market -- Hong Kong.
According to the data analysis of
house prices to income ratio, the most expensive cities for the first five months in terms of global house prices are
Beijing, Hong Kong, Shenzhen, Shanghai and Hanoi, in that order.
China has cities in the first four places. Of course, their backgrounds, systems and policies are different, while the source of funds at the same time is likely to be similar, which means the potential problems in the housing market in Hong Kong are also the same for mainland cities.
According to data of the Hong Kong Monetary Authority obtained from 20 major banks, there are a total of
520,000 cases of outstanding residential mortgage loans, with about
13,000 involving multiple mortgages. That's 2.5 percent of the total.
The outstanding mortgage balance involved is 1.18 trillion yuan, or an average of 2.3 million yuan in each case.
The above number seems not too serious, but has it ever occurred to you that the HKMA
may not have included the number of loan companies involved as the loans developers give buyers might not be included?
Though as an international financial center Hong Kong's financial system is sound, there are still some loopholes in the regulations. Those finance companies are not under HKMA regulation.
Instead, it is according to the regulations of the creditor. The companies registry is responsible for processing the moneylender license application, at the same time enforced by the police force.
So it is difficult for the HKMA to have precise data on the housing loans of finance companies.
Of course, the amount of capital that financial companies have is much less than the major banks in Hong Kong. But the amount of lending still cannot be underestimated.
Once property prices fluctuate, for those through financial company's mortgage lending the default risk is very high. And the bigger problem is that will trigger a domino effect.
So the local property market still faces the danger of falling sharply, as in 1997 to 1998. Why? I'll talk to you next week.
Source: The Standard
http://www.thestandard.com.hk/section-n ... 1106&sid=2
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