Mortgage Market in China


The growth of the China Mortgage can be better understood from its construction

industry. In the year 1998, the total value of outstanding mortgages is about 427 billion RMB (US$51.7 billion). By the end of 2003, the value has reached more than 1,2000 billion RMB (US$1,452.8 billion).

In the end of June 2004, the total value of outstanding China Mortgages increased to 13,800 billion RMB (US$1,670.7 billion). The year on-year rate of increase from 1999 to 2003 is 218.6%?148.72%?65.77%?47.71& and 42.46% respectively.

Mortgage Lending In China

Mortgage lending in China has been growing at a rate of 54.9% between 2000 and 1H2004.The total mortgage lending stood merely at 8.5% of total loans, 11.1% of total GDP, in 2003 versus 34.3% of total loans and 50% of total GDP in Hong Kong. Mortgages being considered as the best lending opportunity, with good asset quality (the non-performing loan ratio is less than 1.5%) and good growth potential (mortgage lending grew 57% year on year in 1H2004). The housing privatizations since 1998 have made mortgage debt a tiny portion of total property assets outstanding. Total outstanding mortgage loans, at CNY1.3 tn, is about 5% of the total value of urban residential property.

Housing Mortgage In China

The housing mortgage in China is not so old in comparison to others. In China the biggest provider of home mortgage loans is the China Construction Bank (CCB). The housing loans made by the four state-owned commercial banks were RMB355.6 billion (about U.S. $43 billion) in the year 1999. From the total loans, RMB217.2 billion (about U.S. $26.3 billion) went to real estate developers and RMB 126 billion (U.S. $15.2 billion) to the mortgage loan sector accounting for about 35% of the country's overall real estate loan amount at the end of 1999. Presently the foreign lenders are allowed into home loan areas after China's accession to the WTO.

Residential Housing investments In China

The success of the reforms in 1998 has translated into a booming domestic property sector and acceleration in housing investments in china. The share of residential housing investment as a percentage of GDP has risen to 5.6% in 2003, up from less than 3% before 1998 and less than 1% before the 1990s. This is in comparison to other developed or emerging economies that had undertaken a higher share of residential housing investments for decades.

Residential investment as percentage of GDP: -

China Japan US Singapore
1960s Na 5.2% 4.6% 5.5%
1970s Na 7.1% 4.9% 7.2%
1980s 0.9% 5.3% 4.4% 9.5%
1990s 2.4% 4.8% 4.1% 8.7%
2000 4.6% 3.7% 4.8% 5.9%

Source: CEIC, Goldman Sachs Research estimates

Mortgage Insurance In China

The China mortgage insurance programme generally covers Smart Mortgage Insurance Programme and Super Insurance Mortgage programme.

  • Smart Mortgage Insurance Programme
    Such type of Mortgages saves the expenses with an interest-free mortgage insurance premium repayment for 3 years.
  • Super Mortgage Insurance Programme
    Such types of insurances reduce the financial burden during the early stage of mortgage term with an interest-free mortgage insurance premium repayment for 3 years.
    It brings more flexibility with deferred principal repayment period ranging from 1 to 3 years, during which only interest is payable

IFC'S Mortgage Services In China

The International Finance Corporation (IFC) has signed an agreement with Advantage Services Holding Limited (ASHL) to invest in Advantage China Holdings Limited (ACHL).

ACHL will establish joint venture companies in China to provide home mortgage origination, borrower credit analysis, and contract underwriting services to Chinese banks.

IFC's investment represents a 24.5 percent direct ownership in ACHL. Other types of shareholders include ASHL and Netherlands Nederlanse Finanierings-Maatschappij Voor Ontwikkelingslanden N.V. (FMO).

Javed Hamid, IFC's Director for East Asia and the Pacific, said, "IFC is very pleased to support the development of mortgage servicing in China where private home ownership is expanding rapidly and lenders need to manage their exposures as they increase their mortgage lending portfolios.

This new institution should help alleviate credit concerns in China where the housing sector is growing steadily, increase homeownership rates, and strengthen families and communities."

IFC's mission is to promote sustainable private sector investment in developing countries, helps in reducing poverty and improve people's lives.

IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets and provides technical assistance and advice to governments and businesses.