Shanghai banks ordered to cut ties with six property firms

Came after the China banking regulatory commission said it found some commercial banks had illegally transferred money from mortgage loan accounts to certain third parties, who were not involved in the properties for which the mortgages were taken out.

BEIJING // China’s banking watchdog has ordered commercial banks in Shanghai to stop working with six estate agencies including the major player Homelink Real Estate.

The other five were not named. Homelink has branches across most Chinese cities, and helps wealthy Chinese to make property investments overseas. The ban will last one month starting today, and will be reviewed after that, the China banking regulatory commission said.

The regulator said it found some commercial banks had illegally transferred money from mortgage loan accounts to third parties, who were not involved in the properties for which the mortgages were taken out. These third parties were found to have further moved the money to one of six real estate companies in Shanghai, according to the Shanghai government.

Some of the estate agencies also helped home buyers to acquire down-payments for property purchases through illegal channels, it said.

The banking regulator has also asked seven Shanghai banks to stop giving housing loans to individuals for two months after they were found to have broken rules in making cash advances.

The ban will have a major impact on the property sector at home and will affect overseas sales because the real estate agencies involved account for the majority of homes available to Chinese buyers.

A Chinese news portal, thepaper.com, quoteHomelinkLink official as saying the firm will have to adopt alternative measures but he did not elaborate.

The ban comes as a rise in the number of wealthy Chinese buying property overseas attracts foreign companies hoping to woo China’s wealthiest.

Foreign developers are eager to get a slice of a vast market estimated to be worth in excess of US$25 billion, as evidenced by the 120 or so property companies pitching to Chinese buyers at a three-day property show in Beijing, which ended in the Chinese capital yesterday.

Data about growth in the Chinese outbound property investment market vary. Savills Research China said it estimated a 30 per cent increase last year.

David Green-Morgan, the director of global capital markets at the commercial property consultancy JLL, said the Chinese buyers’ market grew 46 per cent in 2015. The United States attracted the most purchasers ahead of the United Kingdom and Australia. These countries made up 75 per cent of Chinese overseas property buying and the rest went to other parts of the world, he said.

Among exhibitors at The Luxury Properties Showcase were estate agents from Dubai.

"Dubai offers a safe investment option with high returns," Manish Khatri, the vice president of SPF, a Dubai estate agent that was at the Beijing show, told The National.

“It is one of the best locations for Chinese businesses to carry out overseas marketing. You have to visit the Dragon Market in Dubai to believe it.”

The Chinese have traditionally invested in the United State, Australia and New Zealand. But other locations in Europe and Asia have now joined the race.

One European initiative offers an alluring “golden visa” programme for Chinese nationals to migrate, visit for longer or use EU countries as bases for businesses besides buying property. The visas carry the added advantage of easy travel across the European Union.

Countries such as Greece and Cyprus have programmes that offer residency for three generations for the investor. Although they cannot take a job in these countries, they can rent out their properties and residency makes it much easier to conduct business with firms in these countries.

Spain and Portugal are offering five-year residency permits to investors and their families.

“A major part of the foreign investors attracted by our golden visa programme are Chinese,” said Bobby O’Reilly, the managing director Ur Home Portugal.

“A Chinese investor can live and do business in Portugal after investing as little as €350,000 [Dh1.44 million], which I am told is not much compared to the value of similar properties in Beijing and Shanghai.”

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