China limits issuance in 407b yuan mortgage-backed debt market

Shanghai

CHINA is beginning to curb issuance of securities backed by residential mortgages, expanding efforts to rein in runaway property prices and household debt, sources familiar with the matter said.

The central bank has since April started controlling the size and pace of RMBS issuance by lenders, said the sources, who asked for anonymity because the matter is private. The People's Bank of China is considering including such securities in its assessment of property-related loan exposure, they said.

Slowing banks' ability to issue loans to residential buyers is the latest in a series of measures to stem skyrocketing home prices. A drumbeat of statements designed to cool down price expectations have yet to deter home buyers, who are using real estate as a hedge against inflation.

Commercial banks considered to be too exposed to the property sector have received preliminary guidance from regulators that their RMBS investments should be part of the assessment of overall real-estate exposure, one of the sources said.

The People's Bank of China did not immediately respond to a faxed request for comment.

The size of the RMBS market declined 21 per cent to 407 billion yuan (S$83.3 billion) last year, though it still accounted for the biggest chunk of asset-backed securities in China.

Home prices grew at the fastest pace in eight months in April, with gains made across large and small cities as developers ramped up project launches during a traditionally popular season for buying.

President Xi Jinping in late April repeated his mantra that houses are "for living in, not for speculation" when chairing a meeting of China's 25-member Politburo, the communist party's top ruling body. Recently, policy makers also signalled they may revive efforts to introduce a long-delayed national real estate tax via a trial. BLOOMBERG