Money

Pawnshops cash in on rising home prices

By Shi Jing (China Daily)
Updated: 2010-03-24 07:50

Mortgage business has soared 30 percent in Beijing Huaxia Pawnshop as house prices in the city grew by about 11 percent in the third week of March.

The shop closed three mortgage deals in one day this month at the peak, said Peng Tao, director of the property department of Huaxia pawnshop.

"As house prices keep rising, consumers are not worried about pawning their houses for short-term financing. On the contrary, as the price of houses increase, the number of loans granted has increased," said Peng.

He said for example, at the end of last year, one of our customers wanted to mortgage his house near Chongwenmen, which was valued at 20,000 yuan per square meter.

"Since the price did not meet his expectations at that time, he postponed the plan. But he closed the deal this month after the price rose to 24,000 yuan per square meter. Prices have soared the most in this area," added Peng.

Another reason the mortgage business is unexpectedly good in pawnshops this year is because the banks have imposed stricter lending requirements. In order to boost the economy during the global financial crisis, banks loosened restrictions on loans during the first half of last year.

However, as the economy began to recover, they tightened them again.

As pawnshops now have relatively more lenient and convenient approval procedures compared to the banks they can attract more customers.

"It takes longer to get approval from the bank for a loan, ranging from one week to one month. Pawnshops are more flexible as we aim at providing short-term loans. We cannot have our customers wait that long," said Peng.

To attract more customers, Huaxia has also come up with some new initiatives this month.

If the customer can pay back the money ahead of the due date, a 0.1 percent discount will be made in terms of the interest, which is currently charged at 3.2 percent.

Peng predicts that house prices will probably go down during the second half of this year, as the government is making great efforts to curb rocketing house prices.

He cautions consumers to keep an eye on the mortgage market to avoid any financial loss.