Local banks facing risks in extending loans
24/7/2003 16:34
Commercial banks in Shanghai have extended total real estate loans of
US$29.32 billion in the first half of the year, an increase of 55 percent from a
year before, with the growth in the city up 27 percentage points from that
across the nation, the Shanghai Morning Post reported today.
More than half
of the local real estate loans are individual housing mortgage loans.
The
rapid growth in real estate loans has aroused worries of the People's Bank of
China (PBOC), the country's central bank.
"If local housing prices drop in
the coming a couple of years, borrowers are very likely to break contract with
banks, so lenders are facing potential risks," said a spokesman with
PBOC.
More investments are injected into the local real estate market, with a
main part coming from bank loans. The rapid growth in property prices has
encouraged more banks to enlarge their loan scale to house buyers, the spokesman
said.
However, local housing prices are expected to drop in the coming
several years, which will likely to take a blow to banks, he said.
Housing
price growth around the nation far exceeds the income growth of residents, he
added.
Most Shanghai residents cannot afford the existing property prices,
said Xie Guozhong, economist with Morgan Stanley.
Wendy Zhang/ Shanghai Daily news
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