Banks wary of risks in China's housing push

In 2023, property development loans expanded by a mere 1.5%

Loans to property developers won't see a significant surge despite banks approving RM200b worth of loans for China's 'white list' scheme, S&P Global said.

The scheme, which was launched on 26 January, has local authorities suggesting residential projects deemed eligible for financial assistance to banks. Simultaneously, they are working in tandem with financial entities to fulfil the requirements of these projects.

Key concerns include due diligence of banks and government, project selection, speed of execution, and whether authorities can stimulate the market without shifting risks from developers to governments and banks.

S&P said housing and financial authorities should collaborate on stabilising the real estate sector in response to China's "white list" scheme.

"We believe the policy is aimed at rebuilding homebuyer confidence, not bailing out developers. Projects don't have to be distressed to make the white list. The aim, in our view, is to reduce uncertainty on deliveries. The vast majority of China's new-home purchases are on a pre-sales basis, so such uncertainty can be damaging to the market,” Esther Liu, credit analyst for S&P Global said.

S&P added that in 2023, property-development loans in the banking sector expanded by 1.5%, significantly slower than total loan growth of about 11%.