2014-08-17

Economic Slowdown Is Hitting Mortgages

This article looks at why home owners are giving up their homes. The center of activity is in the Yangtze river delta.

Key paragraph:
"In the past few years, many small business owners blindly invest in real estate, mining and other industries, these industries are now overcapacity, falling asset prices, business owners funding quilt, inability to repay bank debts." General manager of Wenzhou, a microfinance company, told reporters, because real economic downturn, the current bank's non-performing loans in Zhejiang was still rising.

"We are here for personal housing mortgage loans almost no break, but many take the house as collateral consumer and business loans go wrong." Ms. Ge Ningbo, Ningbo, a county bank account manager, told reporters.
Home buyers aren't losing their homes, it's those who used their mortgages as collateral for business and speculative loans. (I'm assuming the Chinese using consumer loans in these cases didn't actually use them for consumption, though some may have.)

Jones Lang LaSalle Research Manager Zhou Zhifeng believes that only when prices fall more than 30% do home owners consider giving up their home. Prices have fallen that much in Wenzhou, where the housing market peaked in 2011, but the rest of the region has yet to see similar declines.

弃房断供“真相调查多因业主资金链断裂
Decline in the real economy, began to accelerate transfer to the housing sector mortgages.

Data from multiple courts show that compared to previous years, the first half of this year, "abandoned house off for" cases has increased, and is concentrated in the economically devastated, investment moisture larger Yangtze River Delta region. Among them, Wuxi involving housing loans overdue also have 98, an increase of 37, off the court for the case Yuyao 36 cases, and only two last year.

However, according to the reporter, "abandoned house off for" phenomenon is not the main cause of increase in house prices, but because of the economic downturn, business owners financial strain caused a chain reaction.

Banking Bureau of Wenzhou City staff responsible for the "default", said the survey, mainly due to the borrower's capital chain, guarantee chain problems, borrowers unable to repay bank loans, only abandoned house foreclosures.

"In the past few years, many small business owners blindly invest in real estate, mining and other industries, these industries are now overcapacity, falling asset prices, business owners funding quilt, inability to repay bank debts." General manager of Wenzhou, a microfinance company, told reporters, because real economic downturn, the current bank's non-performing loans in Zhejiang was still rising.

Much due to their inability to repay

"We are here for personal housing mortgage loans almost no break, but many take the house as collateral consumer and business loans go wrong." Ms. Ge Ningbo, Ningbo, a county bank account manager, told reporters.

Hangzhou High School students, principal analyst told reporters, Hangzhou personal housing mortgage loans for a wide range of off phenomenon has not yet appeared. Even more powerful house prices Yuhang District, also rarely the case off for not also appear.

"Hangzhou appeared mostly off for luxury real estate, amounting to a billion dollars from 50 million yuan to dollars, mainly to repay investors in a year or two, however due to cash flow, price to sell and no disk access, last resort outages. "High Court Chan said.

Since 2011 into private lending crisis from Wenzhou real estate market is depressed, prices are still "stumble endlessly."

2013, Wenzhou had heard thousands of houses, "default", but related investigation Wenzhou Banking Bureau of the bank showed that as of the end of July last year, Wenzhou occurrence of various types of "abandoned house" Case 595 cases, including for operating difficulties can not repay the loan, mortgage real estate "abandoned room" had 580 cases, while only 15 cases of personal housing mortgage loans off the supply.

"The mortgage houses are mortgaged, but the initial investment has not recovered, and now small and micro enterprises do not have collateral difficult to borrow money, so the capital chain rupture." General manager above Wenzhou, a microfinance company said in Zhejiang labor-intensive industries, the lack of high-tech enterprises, industrial restructuring and upgrading difficult, so the real economic downturn.

Ms. Ge told reporters that the current customers to buy more and more financial products, which can reflect the wishes of private investment is not strong, the economy is not active.

"In the past too many banks for corporate credit, as long as 40% of mortgages, 60% will be able to guarantee loans, which causes money to blind investment." Wenzhou Branch, general manager of a commercial bank, said on August 14, the Wenzhou government convened some banks meeting, saying the situation is not optimistic.

The bank branch general manager, said today the government plans to revise the credit rules, all banks under the overall credit for business owners. Each line of credit in the past due to different banks, real estate companies will take to do high assessment to three different financial institutions to do the second mortgage, but after the implementation of the overall credit, this approach will not work.

And encompasses Wuxi Chong'an court cases Jiucheng financial data show that the loan dispute in January-June 2014, personal finance loans has 367, more than doubled last year, involving housing loans overdue also for 98, 37 more than last year.

According to the hospital staff of the Second Chamber of the people dealing with financial disputes revealed Litigation owners mostly from overseas investors generally have two or three houses down the name for. From being seized off for housing point of view, over ninety percent of all vacant rough housing, many of them only purchase contract, did not even apply for certificates of title do so mainly in order to be exempt from various taxes, convenient resold.

"A lot of houses are within the Forward House, Banbuxialai real estate license a year or two, can not transfer the transfer, but the developer does not want to check out, when investors needed funds, can not be realized, had to choose outages." Blissful Lu Qilin, research director, real estate analysts say.

Jones Lang LaSalle Research Manager Zhou Zhifeng think off for two reasons, first, the current property market is no longer as popular as ever, investors lost profit opportunities; on the other hand, owners of their own financial crisis, investment in real estate funds for unsustainable.

In the first half of this year, the people's courts at all levels of the Pearl River Delta 6 City concluded "abandoned house off for" a total of only 79 cases, of which a maximum loan amount of more than 600 million, with an average loan amount of about 22 million. Purchase loans concentrated in the 2009-2011 time, the bank focused on the time taken to court from the beginning of this year, Foshan and Zhongshan cases concentrated in the suburbs of Guangzhou city, mainly in the incident Yuexiu [ Introduction News ], Haizhu.

An incredible case yes, Foshan, a "80" after the defendant, its purchase in 2004 of a property in the Baiyun District of Guangzhou, the total amount of the loan is only 90,000 yuan, in October last year after the break for the defendant directly in court said, "is unable to repay, requiring the auction house."

Off for a high price

2008, due to new houses, second-hand housing prices decline in most of the more than forty three percent or even cut, there have been several major cities in the Pearl River Delta off for tide. However, some buyers choose outages in the property market after 2009 V-reversal, select the Xudai.

"I was there two or three sets of hands of real estate, on behalf of all the villagers take to buy, because the house sold, almost broken capital chain, but in order to ensure that these fellow's name is not included in the bank blacklist, I did not break for , but directly to find other investors to take over and continue to repay bank loans, but I lost the first payment. "an investment in customer Shenzhen Xiong told reporters.

And in 2011 that round because of market regulation caused the market to adjust, does not appear the phenomenon of large-scale outages.

"Off for a high price to pay." Shenzhen real estate professional lawyers said Liu Ru, off for would seriously affect personal credit, bank loans to bring a lot of trouble in the future, not a last resort, buyers generally do not choose outages.

Liu Ru to reporters calculations, a set of 80 square meters of the house, assuming that the total price of 2 million yuan, for the first home buyers, the down payment with at least 600,000 yuan, 1.4 million yuan of loans, according to 30-year benchmark interest rate calculation term of the loan, monthly payments of about 8900 yuan, the monthly average interest repayments in the first year of about 7600 yuan, while the principal is only 1300 yuan, a year down the bank interest alone, more than 90,000 yuan, plus 1% of the deed 20,000 yuan After one year if off for, to pay the cost of up to 710,000 yuan.

"Not only the loss of 710,000 yuan in cash, nor even a house, it is not worthwhile." Liu Ru said.

周志锋 also believes that generally only when prices fell more than three percent, or owners of capital chain is very tight, will consider outages, otherwise, would not run the risk of credit losses and foreclosures.

Currently, the Yangtze River Delta region, although housing prices down, but not yet reached the general decline in most cities over 30 percent of the degree.

According to Transparency houses, network statistics, July Hangzhou (including Xiaoshan, Yuhang) New commercial contract price of 15,789 yuan / square meter, down 9.5 percent. The main city contract price of new housing 22,232 yuan / square meter, down 2.4 percent.

Regulation of the deepest in Wenzhou, even if house prices fell, select the outages are still a tiny minority.

Wenzhou City Housing and Urban-Rural Construction Committee spokesman Daixu Jiang said earlier this year, compared with the previous regulation early in 2011, and now the Wenzhou real estate prices fell an average of 26%. But unofficial statistical agencies and developers who believe that Wenzhou has more than 40 percent decline in house prices.

After the "Wenzhou people are talking about credibility, like loans from financial institutions, if off for the future, would like to make a comeback from a bank loan will be difficult, preferring losses will try to dispose of assets." Wenzhou local A media veteran, said in 2011 Central does not allow place to relax regulation, Wenzhou has been Qiang Cheng, has not yet broken for the tide. At present, Zhejiang has launched a vigorous bailout tide, falling house prices is not expected too much space, so they did not need to break for

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