Date
20 September 2017
It is estimated that 30 percent of property transactions in China's top cities are financed by P2P platforms. Photo: Xinhua
It is estimated that 30 percent of property transactions in China's top cities are financed by P2P platforms. Photo: Xinhua

How internet finance fuels China property bubble

Internet finance has been a great boon to small businesses, which normally have limited access to bank loans.

But these underregulated lending platforms are also fanning the flames of a hot property market in China’s top-tier cities.

While it’s hard to move inventory in small cities, demand has been as strong as ever in metropolises where jobs are plenty and public facilities are far better.

As home prices keep surging, end-users and speculators have been piling into properties in Beijing, Shanghai, Shenzhen and Guangzhou.

Peer-to-peer lending now helps many who normally cannot afford a property to jump on the bandwagon, too.

For those who cannot come up with 30-50 percent of the property value as down payment under the current rule, they can borrow from P2P platforms to make up for the shortfall, commonly referred to as shoufudai, or down-payment loan, according to mainland media.

P2P companies typically package the products to yield 8-12 percent return per annum to lure investors, and then lend the money to borrowers for home purchases.

Keen to do more business, property agents are glad to team up with these P2P setups. It is estimated that about 1 trillion yuan (US$153.5 billion) worth of property transactions have been financed this way.

Compared with bank mortgages, borrowers may be able to use much higher gearing when they resort to P2P platforms, which are barely regulated.

If home prices for any reason come down sharply, those who give money to these P2P sites may never see their money back.

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CG

EJ Insight writer

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