March 15,2011

New Mortgage loans in Shanghai Dropped 63% YoY on Sluggish Home Sales

By Lu Ting,Hong Kong

Mortgage loans in Shanghai added RMB2.9bn in Feb, down 49% MoM from Jan (not seasonally adjusted) and 63%YoY. PBoC Shanghai Branch said it was due to a notable drop in the city's home sales in Feb on property tightening. This is consistent with data from Sofun, which suggested Feb home sales in Beijing, Shanghai and Chongqing dropped significantly from Jan, as major cities rolled out draconian city-specific property tightening measures in Feb.

National data suggest that long-term new household loans (almost all of them are mortgage loans) slumped to RMB105bn in Feb from RMB194bn in Jan. If we put Jan-Feb together to adjust for CNY effect, new mortgage loans plunged 40% YoY in Jan-Feb. Implications: (1) the third round of property tightening measures (with a focus on purchase restrictions nationwide) was quite effective, so we will see slumping transaction volumes and perhaps moderately falling home prices; (2) Suppose mortgage loans fall 40% from last year's RMB2.0tn, given similar total new loan quota this year (this year could be 7.0-7.5tn), about RMB800bn fund could be on other sectors instead of properties.


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