Reuters logo
Fitch: China Housing to Cool, but Caution over Mortgage Growth
December 20, 2016 / 1:50 AM / a year ago

Fitch: China Housing to Cool, but Caution over Mortgage Growth

(The following statement was released by the rating agency) SHANGHAI/HONG KONG/SINGAPORE, December 19 (Fitch) [Fitch Ratings expects China's housing market to cool in 2017 as government measures play a role in easing mortgage lending growth and dampening price rises. However, we still believe growth in mortgage lending could continue to add to risks in the banking sector - with fast-growing, mid-tier banks the most vulnerable. We expect tighter property-market regulations to restrain investment demand in higher-tier cities, contributing to a fall in housing sales of 15% in 2017, following record growth of around 40% in 10M16. A sharp correction in prices is unlikely, but we expect only a small increase in Tier 1 cities, compared with a 24% gain in the first nine months of 2016. Price rises are likely to be even smaller in lower-tier cities - where destocking was marginal in 2016 and did little to bring down developers' large inventories. Mortgage lending is likely to slow next year, in keeping with the general cooling of the property market. However, banks will retain a strong appetite for providing mortgage loans, which they view as relatively safe assets in terms of collateral protection. We still expect outstanding mortgage balances to grow faster than incomes in 2017, even if the estimated 33% growth seen in 2016 is unlikely to be sustained. Residential mortgage loans have become a key driver for Chinese banks' loan growth since 2015. Household loans - the majority of which are residential mortgage loans - contributed 47% of total new loans in 9M16, up from 31% in 2015. Fitch believes credit risks in the banking sector will increase if rapid growth in residential mortgages continues. The household debt-to-income ratio continued to rise in 2016. Household leverage is still not high by regional or global standards, but further increases could potentially create medium-term repayment risks. Banks relying primarily on property values to support new mortgage loans will become more vulnerable to changes in debt-servicing dynamics, especially if property prices fall. Competition among lenders to sustain growth in their mortgage portfolios has the potential to put pressure on underwriting standards. Furthermore, anecdotal evidence shows some down-payments are being funded by other parties - such as non-bank lenders, businesses, and families. Loans are not as safe as loan-to-value ratios would imply when this happens. State banks have traditionally dominated mortgage lending, but some mid-tier banks have become more aggressive since 2015. Fitch sees higher risks in the mortgage loan books of these faster-growing banks, reflecting their generally higher risk appetite and less sophisticated risk controls. For more details see our report "Asia-Pacific Banks Chart of the Month - December 2016", available at or by clicking the link above. Contact: Jaclyn Wang Associate Director Financial Institutions +86 21 5097 3038 Fitch Ratings (Beijing) Ltd. Shanghai Branch 3401, 34/F, Shanghai Tower No. 479, Lujiazuihuan Road Shanghai, 200120, China Hilary Tan Director Structured Finance +852 2263 9904 Su Aik Lim Senior Director Corporate Finance +852 2263 9914 Dan Martin Senior Analyst Fitch Wire +65 6796 7232 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Related Research Asia-Pacific Banks Chart of the Month - December 2016 here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below