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Novel Data on China's Mortgage Loans

October 11, 2017
Brandon Emmerich
Granite Peak Advisory

China’s banks are directed by the state, without irony, to “vigorously promote reasonable home ownership.” Their most recent annual reports repeatedly bury in the notes this line, or some variant of it, as an explanation for the explosion of mortgage lending over the previous 12 months. Granular mortgage data however, is hard to come by – so we created a process to collect, clean, and interpret that information.

China’s banks are directed by the state, without irony, to “vigorously promote reasonable home ownership.” Their most recent annual reports repeatedly bury in the notes this line, or some variant of it, as an explanation for the explosion of mortgage lending over the previous 12 months. Granular mortgage data however, is hard to come by – so we created a process to collect, clean, and interpret that information.

The complete data set spans 83 cites and 118 banks, 26 of which are listed in HK or the Mainland. The resulting 853 bank-city combinations include data on the interest rates and down payment requirements for first and second homes.

As you can see below, the wide regional divergence of average mortgage rates reflects China’s balkanized real estate market – the average mortgage rate in Changzhou is nearly 100 basis points lower than in Zhengzhou.

Data on down payments gives us another angle for understanding regional differences in China’s housing market. While the down payment requirement for a first home remains under 40% for nearly all cities, there is a much wider dispersion of down payment requirements for second homes – the mean down payment in frothy housing markets like Shenzhen, Nanjing, and Suzhou all top 70% whereas Northeastern cities like Shenyang and Harbin require only 30%.

New Home Down Payments.png

According to PBOC data collected from Wind Information, new home loans totaled 42% of all new loans over the past 12 months. Therefore, bank-level mortgage rate data offers predictive power for forecasting interest income of a large section of bank new business. For example, we can use the data to see that the average first home mortgage rate offered by Guangfa Bank is 45 basis points higher than that for HSBC, and the dispersion of rates offered by CITIC is much greater than Everbright.

Mortgage Rates By Bank.png

Contact us for the complete set of data set of first and second home mortgage rates and down payments for all 853 bank-city pairs.

Brandon Emmerich

Brandon Emmerich

Principal
Granite Peak Advisory
  • Principal at Granite Peak Advisory. He helps institutional investors understand China’s financial markets and economy. 
  • Additionally, his data-driven research has been cited in the Financial Times, Wall Street Journal, New York Times, and Dow Jones Newswire.

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book

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China’s banks are directed by the state, without irony, to “vigorously promote reasonable home ownership.” Their most recent annual reports repeatedly bury in the notes this line, or some variant of it, as an explanation for the explosion of mortgage lending over the previous 12 months. Granular mortgage data however, is hard to come by – so we created a process to collect, clean, and interpret that information.

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Principal
Granite Peak Advisory
  • Principal at Granite Peak Advisory. He helps institutional investors understand China’s financial markets and economy. 
  • Additionally, his data-driven research has been cited in the Financial Times, Wall Street Journal, New York Times, and Dow Jones Newswire.
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Granite Peak Advisory

Channels

AsiaStrat
Granite Peak Advisory
Track Research
Trivium China
Gao Feng
Real Estate Foresight
China Beige Book