China's property stimulus raises risks for banks in smaller cities, S&P Global says
BEIJING - China's latest steps to revive its struggling property market could pose risks to banks operating in lower-tier cities, S&P Global said on Monday.
Property prices in smaller tier-three cities are expected to decline about 14% through the 2024-2025 period, the report said. This could potentially push some homebuyers into negative equity situations, where their outstanding mortgage balances exceed the value of their properties, it said. "The removal of the floor on mortgage rates will also give lenders less buffer to absorb potential losses when defaults do happen," said S&P Global Ratings credit analyst Ryan Tsang.
A number of cities across China, including first-tier Shanghai and lower-tier Wuhan and Changsha, have lowered down payment and mortgage loan interest rates in response to the nation's"historic" steps announced on May 17 to stabilise its crisis-hit property sector.
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