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Risk of second-hand housing loan warned

By Ding Qi (chinadaily.com.cn)
Updated: 2008-07-25 16:32

The risks for second-hand housing loans are the highest among all property loans in Shanghai, the city's banking regulator warned on Thursday, calling for local lenders to pay closer attention to the sector.

In the biannual report on property credit, the Banking Regulatory Bureau of Shanghai said that second-hand property loan had become a crucial force propelling the city's housing credit growth. The loan increased 8.34 billion yuan ($1.23 billion) in the first half of this year, much higher than the 300 million yuan growth in new apartment loans.

However, the non-performing loan (NPL) ratio of second-hand houses reached 1.64 percent during the period. The highest of all property loans, the bureau stressed in the report.

Commercial banks should pay enough attention to any abnormality in the second-hand housing loan sector and take effective measures to ward off risks, according to the regulator.

Under a tightening credit policy, many property developers suffered from a strain in cash flow. Some turned to illegal means such as forging registered capital or mortgage agreements to defraud banks of loans, according to a report from the Shanghai-based Oriental Morning Post.

However, the banking regulator said the overall credit risk of the nation's financial hub is still controllable. By the end of June, outstanding NPLs of the city's lenders totaled 1.61 billion yuan, 170 million less than the figure at the beginning of this year. The NPL ratio also dropped 0.48 percentage points to 1.92 percent. In addition, the default rate of property development loans and mortgage loans both declined.