Real Estate Trust Product Quantity, Scale Plummet as Policies Tighten in 2nd Half
An Zhuo
DATE:  Aug 16 2019
/ SOURCE:  yicai
Real Estate Trust Product Quantity, Scale Plummet as Policies Tighten in 2nd Half Real Estate Trust Product Quantity, Scale Plummet as Policies Tighten in 2nd Half

(Yicai Global) Aug. 16 -- The quantity and scale of China's new real estate trust products have fallen sharply since last month after rising in the first half of this year.

"We still have sporadic business but experience difficulty in expanding, because of not only tightening policies but also few sources of good projects," a source at a trust company in North China told Yicai Global.

The quantity of collective real estate trust products issued last month dropped by about one-fifth from June, and sums raised fell by 14.22 percent, sector statistics show. This decline has been even more conspicuous in the first half of this month.
Real estate investment trusts are collective schemes that generate recurrent income to investors via investment in income-generating properties. 
Only 47 real estate trusts formed in this month's first two weeks, a mere one-quarter of the tally in the same period last year, and money raised only makes up one-sixth of that in the same period last year, according to the Usetrust website operated by Nanchang Use Investment and Financial Consultants.

"Some trust companies demand balance control. The balance as of Sept. 30 cannot exceed that as of June 30. This means almost no increment," an insider with a South China trust firm said to Yicai Global, "Some trust firms have even suspended their real estate businesses."

"Policies are tightening and the whole industry is walking a tightrope. Some trust firms have even closed their real estate trust lines," an insider from a trust company in Central China told Yicai Global.

Local banking regulatory bureaus provide window guidance to trust firms on their real estate segments to prevent and control financial risks, noted Shuai Guorang, a Usenet researcher, adding that rising house prices and market risks in the realty trust businesses are pushing investors to be more chary in choosing projects as property markets in most regions are saturated.

The average annual yield on all realty trust products climbed to nearly 8 percent in last year's second half and kept rising up to 8.5 percent in the first half of this year.

Real estate companies' trust financing costs are likely to be more than 10 percent or even 15 percent in the second half, a sector insider told Yicai Global.

Property trust businesses are a key source of revenue, so some smaller operators prefer to mothball this line because they cannot find suitable alternative assets in the market, the source stated.

Editors: Tang Shihua, Ben Armour

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Keywords:   Real Estate Trust