Recently, a new round of mortgage loan competition has emerged among banks in Shanghai. With the growth of personal operating loans, car loans, and consumer loans slowing down, many banks are now viewing mortgage loans as an important “life-saving straw” for retail business. They not only increase assessment indicators but also aggressively compete for real estate agency resources, with even details like employee attire and offering coffee and milk tea becoming competitive tactics.
Market insiders point out that although the Shanghai property market is currently “active” in terms of transactions, fundamentally it still relies on “price for volume exchange”. The phenomenon of residents proactively reducing leverage is evident, and the market still has a considerable distance to go before a full recovery.
According to a report from “Economic Observer”, since March this year, the Shanghai property market has seen increased transactions, leading to a rapid warming up of the bank’s mortgage loan business. Many banks have required their branches to increase mortgage loan disbursements in the second quarter by 20% to 30% compared to the same period last year, and frontline customer managers are required to complete tens of millions of yuan in new mortgage business.
Han Tao, a retail business customer manager working at a city commercial bank in Shanghai, revealed that in April this year, the branch required a 30% increase in mortgage loan disbursements in the second quarter, meaning he personally needs to achieve an additional 18 million yuan in mortgage business.
“Now all banks are competing for mortgage business.” Han Tao said that since the second-hand housing mortgage interest rates in the Shanghai area generally stay around 3.06%, with little difference among banks’ interest rates, the competition has shifted towards “service and speed”.
Another Shanghai bank client manager, Li Jun, mentioned that since April, he has almost daily visits to real estate agencies, trying to establish closer relationships by offering milk tea, coffee, and cakes to encourage them to prioritize giving mortgage business to his bank.
“Everyone appears harmonious on the surface, but actually competing behind the scenes.” Li Jun said that on one occasion, two agency managers had birthdays, and he gave a 6-inch cake, only for another bank’s client manager to directly deliver a 12-inch cake.
The report indicated that several large real estate agencies in Shanghai currently hold over 80% of the market share, making them core resources fiercely contested by banks. As the competition for mortgage loans heats up, some real estate agencies have begun conducting “monthly evaluations” of their partner banks based on criteria such as loan efficiency, approval speed, and service quality to decide on future business distribution proportions. Banks with higher ratings can expect more mortgage loan applications in the following month, while those ranked lower might face business reduction.
At the same time, many banks have recently increased the scrutiny of their mortgage loan assessments.
Some bank managers even require male staff to wear formal attire when visiting agency stores, while female staff are expected to tie their hair in a braid to meet the service image standards of the agencies.
Data shows that from March to April this year, approximately 59,200 second-hand housing units were sold in Shanghai, reaching a new high for the same period in nearly five years. In April alone, there were 28,742 transactions, a 22.3% increase year-on-year. During the “May Day” holiday period, the volume of second-hand housing transactions in Shanghai also increased by nearly 16% year-on-year.
However, market insiders believe that the current uptick in the property market does not necessarily indicate a return to an upward cycle. The current rise in transactions is primarily based on “price for volume exchange”, where sellers proactively lower prices, and policies reducing the threshold for property purchases have unleashed pent-up demand, rather than a resurgence of strong asset appreciation expectations among residents.
Prior to this, Shanghai relaxed property market policies, including lowering the purchase threshold and expanding eligibility for new Shanghai residents to buy homes, catering to some pent-up and upgrade demand.
Nevertheless, the report highlighted that the current main transactions still focus on the sub-4 million yuan market, mainly comprising first-time buyers in the city center looking for old properties and convenient suburban residences, indicating that the overall market is still driven by “price for volume exchange”.
Han Tao stated that the Shanghai property market is completely different from five years ago. In the past when the market was hot, many people were driven by investment and speculation, whereas now it is mostly supported by actual housing needs.
“It’s not a comprehensive recovery yet, but a demand-driven base.” He said.
On the other hand, banks internally are beginning to worry about the risks behind the rapid growth of mortgage loans. According to reports, after the “May Day” holiday, banks in the Shanghai area received risk alerts, requiring them to pay attention to mortgage loan default risks, as well as whether there are any illegal practices in obtaining business and overly simplified approval processes.
Han Tao revealed that banks have recently requested customer managers to reduce external marketing activities and strengthen risk management.
Regarding the peculiar phenomenon of a “hot market with cold loans”, financial blogger “Uneasy Cola Cake” further analyzed that the current market is entirely driven by price reductions. It mainly entails digesting the pent-up demand from the past two years, indicating that the market is in a phase of repair rather than an upward trend. Unlike the strong “buying high” sentiment in the property market around 2021, the current market is mainly supported by genuine buyers. Buyers prioritize low total prices and access to school districts rather than investment returns.
According to data released by the People’s Bank of China, long-term household loans in April decreased by 340.8 billion yuan. Since long-term loans mainly consist of mortgages, this implies that even though there has been a slight increase in property transactions, the total volume of residential mortgages is still decreasing.
“Uneasy Cola Cake” analyzed that although there has been an increase in second-hand property transactions in Shanghai recently, the willingness of residents to leverage themselves for buying homes is actually decreasing. “On one hand, this is related to the new policies on housing provident funds where some residents are switching commercial loans to provident fund loans; on the other hand, it also reflects that residents are still proactively ‘deleveraging’, paying off debts early and reducing debt pressures.”
He mentioned that currently, buyers are generally more cautious, and even if they buy a property, they prefer to reduce the loan amount. Previously, they might have taken out a loan of 3 million yuan, but now they are only willing to borrow between 1 million to 1.5 million yuan, aiming to minimize long-term debts. Additionally, the drop in property prices directly reduces the loanable amount. Previously, for properties priced at 8 million yuan, buyers could borrow up to 4 million yuan. However, with a significant number of transactions now centered around properties valued at around 3 million yuan, even with a mortgage, the loan amount typically only goes up to 1 million to 1.5 million yuan.
He said, from the information available to him, the current major buyers in the market are mainly first-time home buyers, including government officials, corporate employees, and “new Shanghai residents” with relatively stable incomes, while the demand for high-leverage investment properties has visibly weakened.
This phenomenon of “increased transactions but decreased mortgage loans” precisely reflects that the current property market is mainly supported by low-priced essential needs, and overall market sentiment remains conservative. He predicts that after June this year, some regions may still face significant downward pressure on property prices.
The blogger believes that there is currently a lack of confidence in the market that “property prices will continue to rise”, with many buyers willing to sacrifice their living quality to reduce the barrier for purchasing a home. Simultaneously, sellers generally possess the mentality of “escaping the peak”. Some property owners holding old properties believe that the current period may be the last chance to sell their “old fixer-upper” homes, hence are willing to further lower prices to facilitate transactions.