Report on Mortgage Loans Statistics, April-September 2009 Research and Statistics Department Monetary Authority of Macao Mortgage lending is a core business of Macao banks, accounting for over 45% of total private loans of the banking sector. In addition, it serves as an indicator of local property-market conditions. The AMCM started to conduct a comprehensive quarterly survey of mortgage loans in December 2008. Starting this issue of the Macao Monetary Research Bulletin, an analytic report on Macao s latest mortgage loans statistics will be published on a semi-annual basis. The regular dissemination of this Report aims at facilitating the consistent surveillance of financial regulators and market participants over the exposure to and risk of the real-estate sector. It will also strengthen the flow of relevant market information in the financial and property markets, which will help lift the efficiency of market operations. 1. Concepts of Mortgage Loans Statistics Mortgage loans in this report refer to real estate-related lending extended by banks to both individuals and business entities. They are broadly classified into residential mortgage loans (RMLs) and commercial real estate loans (CRELs). In line with the methodology for compilation of Financial Soundness Indicators advocated by the International Monetary Fund, RMLs are defined as credit facilities that are collateralised by residential real estate while CRELs are defined as credit facilities - 71 -
that are collateralised by commercial real estate, credit facilities to construction companies and credit facilities to finance property development and investment (including land development and construction of industrial, commercial and residential buildings for sales or for lease). The scopes of RMLs and CRELs are defined to cover real estate-related lending comprehensively and hence our survey would effectively monitor the size of exposure to the real estate sector of Macao banks. 2. New Approvals of RMLs Reflecting the rebound of the residential property market from the sharp correction experienced in the second half of 2008, new approvals of RMLs rose considerably in the first nine months of 2009, with major increases in the second and third quarters. On a quarterly basis, new RMLs approved soared 74.3% 1 in the second quarter of 2009 and further by 58.0% in the third quarter, to MOP6.2 billion. Compared to the first quarter, new approvals of RMLs surged 175.5% in the quarter through September 2009 (Table 1). New approvals of RMLs to residents dominated, accounting for 82.5% of all new RMLs approved for the six months ending September 2009. In terms of growth, however, new approvals to non-residents outpaced those to residents, soaring 301.1% from less than MOP0.3 billion in the first quarter to MOP1.1 billion in the third quarter. New approvals to residents in the third quarter also surged 157.2% compared with the first quarter. Analysed by loan usage, new RMLs approved for financing the purchase of residential properties made up the vast majority, accounting for 82.2% of all new RMLs approved in the six months to September 2009. Approvals for purchase of residential properties registered growth of 55.2% and 81.6% in the second quarter and third quarter respectively. On the other hand, approvals for other purposes rose 179.2% in the second quarter but decreased 14.0% in the third quarter. 1 All growth figures in this Report are on a quarter-to-quarter basis, except where otherwise stated. - 72 -
Table 1: New Approvals of RMLs (Period Figures) 2008 2009 Quarter-to-quarter change - 73 - Quarter 4 1 2 3 (MOP'000, unless stated otherwise) 2009 Q1 2009 Q2 2009 Q3 1. New Residential Mortgage Loans (RMLs) approved 1,660,092 2,255,392 3,931,290 6,212,845 35.9 74.3 58.0 - Residents 1,534,020 1,968,668 3,304,415 5,062,908 28.3 67.9 53.2 - Non-residents 126,072 286,724 626,875 1,149,937 127.4 118.6 83.4 2. New RMLs approved by sector of borrowers and by usage (a) To individuals 1,411,614 2,078,232 3,135,548 5,527,776 47.2 50.9 76.3 (i) to finance purchase of residential properties 1,096,825 1,865,579 2,676,933 4,878,512 70.1 43.5 82.2 (ii) Others 314,789 212,653 458,615 649,264-32.4 115.7 41.6 (b) To enterprises 248,478 177,160 795,742 685,069-28.7 349.2-13.9 (i) to finance purchase of residential properties 8,609 42,771 285,578 501,248 396.8 567.7 75.5 (ii) Others 239,869 134,389 510,164 183,821-44.0 279.6-64.0 Report on Mortgage Loans Statistics, April-September 2009
Equitable mortgage, accounting for only a small portion (14.4%) of new RMLs approved, witnessed a notable increase of 1,880.8% from less than MOP50 million in the first quarter to MOP0.9 billion in the third quarter. Chart 1 depicts the distribution of new approvals of RMLs by loan amount. Of the MOP5.4 billion new RMLs approved for purchase of residential properties in the third quarter of 2009, close to half (49.2%) were for loans with amount of over MOP3.0 million, up from 43.5% in the previous quarter. Loans with amount between MOP1.0 million and MOP2.0 million were the second-largest group with a 20.8% share, slightly up from 19.4% in the second quarter. Meanwhile, the share of loans with amount in the range of MOP2.0 3.0 million slid from 23.9% to 18.7% in the third quarter. Chart 1: Approvals of New RMLs* by Loan Amount 50 45 40 35 30 25 20 15 10 5 0 49.2 43.5 38.3 36.7 23.9 20.8 19.4 18.7 17.0 10.6 10.0 5.5 0.7 0.6 1.7 1.9 0.4 1.0 300 300 ~ 500 500 ~ 1,000 1,000 ~ 2,000 2,000 ~ 3,000 > 3,000 (in MOP '000) 2009Q1 2009Q2 2009Q3 Note: *New RMLs approved in this chart include new RMLs approved to finance purchase of residential properties only. The vast majority of new RMLs approved were arranged on floating rate basis. Fixed rate mortgages accounted for 12.0% of the total in the third quarter, up from less than 3.0% in the previous quarter. With respect to floating rate RMLs approved, 50.3% of - 74 -
total new RMLs approved were priced at more than 2.5% below the prime rate, up considerably from 27.5% in the second quarter. On the other hand, 16.2% were priced at 2.0 2.5% below the prime rate in the third quarter, down from 39.4% in the previous quarter. 3. New Approvals of CRELs New approvals of CRELs grew 35.1% in the third quarter of 2009 to MOP3.4 billion, following a 23.9% increase in the preceding quarter. The resident component surged 117.0% from MOP1.5 billion in the first quarter to MOP3.3 billion in the third quarter, whereas the non-resident component dropped 86.8%, leading to a fall in its share to a mere 1.9% in new approvals in the third quarter. Analysed by loan usage, new CRELs approved to finance property development 2 saw a rise in proportion from 27.7% in the first quarter to 32.7% in the third quarter of 2009, as its value rose 97.5% concurrently. Chart 2 depicts the distribution of new approvals of CRELs by loan amount. In the third quarter of 2009, 45.4% of new CRELs approved were for amount of over MOP150 million, down from 55.4% in the previous quarter. Loans with value ranged MOP10 50 million formed the second-largest group, with a rise in share from 10.8% in the second quarter to 18.6% in the third quarter. Concurrently, the share of loans for amount in the range of MOP100 150 million fell notably to 3.1% in the third quarter. 2 Including construction of residential, commercial and industrial buildings. - 75 -
- 76 - Table 2: New CRELs Approved (Period Figures) 2008 Quarter 4 1 2 3 2009 Q1 2009 Q2 2009 Q3 1. New CRELs approved (Period figures) 1,300,708 2,014,863 2,495,426 3,370,254 54.9 23.9 35.1 - Residents 649,046 1,523,396 2,283,889 3,305,215 134.7 49.9 44.7 - Non-residents 651,662 491,467 211,537 65,039-24.6-57.0-69.3 2. New CRELs approved by usage (a) To finance property development (including construction of residential, commercial and 478,400 557,552 299,913 1,101,128 16.5-46.2 267.1 industrial building) (b) To finance property investment (purchase of properties) 596,287 568,647 823,515 804,335-4.6 44.8-2.3 (c) Others 226,021 888,664 1,371,998 1,464,791 293.2 54.4 6.8 2009 (MOP'000, unless stated otherwise) Quarter-to-quarter change Report on Mortgage Loans Statistics, April-September 2009
Chart 2: Approvals of New CRELs by Loan Amount 60 55.4 50 40 40.9 45.4 30 20 10 0 1.3 1.8 1.3 1,000 1,001 ~ 5,000 11.9 6.3 7.4 8.6 6.1 3.6 5,001 ~ 10,000 25.4 10.8 18.6 10,001 ~ 50,000 22.5 2.9 11.1 50,001 ~ 100,000 0.0 15.5 3.1 100,001 ~ 150,000 > 150,000 (in MOP '000) 2009Q1 2009Q2 2009Q3 With respect to lending rate, 34.1% of new CRELs approved were arranged on HIBOR 3 basis in the third quarter of 2009, down from 54.6% in the second quarter. The share of new CRELs priced at or below prime rate stood at 59.8% in the third quarter, up from 40.3% in the second quarter. The shift in distribution could be attributed to the widening prime/hibor gap. 4. Outstanding RMLs and CRELs As at end-september 2009, the outstanding balance of RMLs stood at MOP40.7 billion. This corresponded to a notable increase of 10.8% compared with a quarter ago or of 15.8% from six months earlier. RMLs to residents remained dominant. Their outstanding value reached MOP35.3 billion at end-september 2009, equivalent to 86.7% of total RMLs outstanding. As of 30 September 2009, the outstanding balance of CRELs amounted to MOP36.5 billion, 2.9% above its end-june level or 3.8% above its end-march level. The resident component accounted for 86.3% as at end-september 2009. Its value rose 5.0% since end-march 2009. 3 HIBOR refers to Hong Kong interbank offered rate. - 77 -
- 78-2008 Table 3: Gross Outstanding RMLs and CRELs Quarter 4 1 2 3 2009Q1 2009Q2 2009Q3 1. Gross outstanding RMLs (End-of-period figure) 34,336,481 35,159,414 36,764,673 40,725,447 2.40 4.57 10.77 - Residents 30,331,230 31,076,977 32,376,833 35,299,992 2.46 4.18 9.03 - Non-residents 4,005,251 4,082,437 4,387,840 5,425,455 1.93 7.48 23.65 2. Gross outstanding RMLs overdue 70,314 83,830 86,359 95,634 19.22 3.02 10.74 3 Gross outstanding CRELs (End-of-period figure) 34,140,419 35,213,280 35,512,402 36,547,934 3.14 0.85 2.92 - Residents 29,134,468 30,045,650 30,643,147 31,538,328 3.13 1.99 2.92 - Non-residents 5,005,951 5,167,630 4,869,255 5,009,606 3.23-5.77 2.88 4. Gross outstanding CRELs overdue 189,729 190,334 178,948 119,365 0.32-5.98-33.30 Real Estate-Related Loans (RMLs+CRELs) (percentage points) 5. Share in total loans to private sector 45.5 47.1 46.6 45.4 1.63-0.49-1.23 - RMLs 22.8 23.5 23.7 23.9 0.73 0.18 0.21 - CRELs 22.7 23.6 22.9 21.5 0.89-0.67-1.44 6. Delinquency ratio 0.38 0.39 0.37 0.28 0.01-0.02-0.09 - RMLs 0.20 0.24 0.23 0.23 0.04 0.00 0.00 - CRELs 0.56 0.54 0.50 0.33-0.02-0.04-0.18 7. Write-off ratio (Period figures) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 - RMLs 0.01 0.00 0.00 0.00-0.01 0.00 0.00 - CRELs 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2009 (MOP'000, unless stated otherwise) Quarter-to-quarter change Report on Mortgage Loans Statistics, April-September 2009
Gross outstanding RMLs as a percentage of total private loans (including both residents and non-residents) were 23.9% at end-september 2009. It was 0.4 percentage points higher than the comparable ratio six months ago, indicating a faster growth of RMLs than total private loans in the six months to September 2009. Concurrently, the share of gross outstanding CRELs in total private loans stood at 21.5% at end-september, down 2.1 percentage points. As a result, the share of property-related loans 4 in total private loans, a broad indicator of Macao banks exposure to the real-estate sector 5, edged down to 45.4% from 47.1% at end-march 2009. The delinquency ratio of RMLs, defined as the ratio of the amount of RMLs overdue for more than three months to total outstanding RMLs, provides an indication of asset quality of the loan portfolio. The ratio edged down to 0.23% at end-september 2009 from 0.24% at end-march. The delinquent amount of RMLs stood at MOP95.6 million at end-september 2009, compared with MOP83.8 million six months ago. On the other hand, the delinquency ratio of CRELs stood at 0.33% at end-september 2009, 0.21 percentage points down from six months ago. Correspondingly, the value of delinquent CRELs dropped 37.3% to MOP0.1 billion. As a result, the combined delinquency ratio of RMLs and CRELs improved to 0.28% at end-september 2009 from 0.39% at end-march. Throughout the first nine months of 2009, the write-off ratios of RMLs and of CRELs were close to zero. Meanwhile, underpinned by the rebound of the property market, the estimated amount of RMLs in negative equity decreased considerably from MOP2.1 billion to MOP0.7 billion in the six months ended September 2009. 4 RMLs and CRELs are combined to provide a measurement of property-related lending. 5 This indicator, however, is a broad measurement in the sense that different types of real estate-related loans (residential mortgage loans, loans to construction companies and other loans collateralised by commercial real estate) may have different risk characteristics. - 79 -
5. Conclusion The notable growth of new RMLs and CRELs approved in the first nine months of 2009 reflected the rebound in the local property market, underpinned by low interest rates, the SAR Government s Scheme of Interest Subsidy for Personal Housing Mortgage Loans and Credit Guarantee Plan for Personal Housing Mortgage Loans introduced in June 2009. The property-related lending continued to represent a significant component of bank assets, though its share in total loans shrank slightly. Meanwhile, its quality held up well despite the less favourable macroeconomic situation as the delinquency ratios and write-off ratios stayed at very low levels throughout the period under review. - 80 -
Annex: Glossary Residency An individual is classified as a resident if he/she has a centre of economic interest in Macao. He/she has resided, or will reside, in Macao for over a consecutive period of at least one year. The individual s residency in Macao should be supported by his/her Macao home address. If the place and/or period of residency cannot be ascertained, the holding of a Macao Identity Card can be used as a proxy for Macao residency. Foreign students resided in Macao and cross-border workers (e.g. those who commute from Hong Kong or the Mainland to Macao every day) are treated as nonresidents. Similarly, a household member who studies abroad and/or seeks medical treatment abroad remains a resident of Macao as long as he/she remains a member of a household in Macao. A company has its place of operation (e.g. production of goods and/or provision of services) in Macao for over a consecutive period of one year. The company s operations in Macao should be supported by its Macao business address. If the place of operation and/or the period of operation cannot be ascertained, the holding of Registo da Sociedade (Company Registry) and the business address appearing on the Registry may be used as a proxy for residence. Residential mortgage loans (RMLs) RMLs refer to credit facilities provided by banks to individuals and enterprises that are collateralised by residential real estate. Residential real estate includes houses, apartments and other dwellings (including uncompleted units) intended for occupancy by individual households. It can be residential properties occupied by owners or for leasing. Overseas real estate is excluded from the survey. Commercial real estate loans (CRELs) Commercial real estate loans (CRELs) refer to credit facilities provided by banks (i) to individuals and enterprises that are collateralised by commercial real estates, (ii) to construction companies and (iii) to finance property development and investment, - 81 -
including land development and construction of industrial, commercial and residential buildings for sales or for lease. Commercial real estate encompasses buildings, structures, and associated land (including uncompleted units) used for office, retail and wholesale, industrial and hotels. Overseas real estate is excluded from the survey. New RMLs (or CRELs) approved New RMLs (or CRELs) approved are loans approved (RMLs or CRELs) during the reporting period. They include loans that are approved and drawn down during the reporting period, and loans approved but not yet drawn during the reporting period. Equitable mortgage Equitable mortgage refers to RML which is collateralised by uncompleted unit. Delinquency ratio Delinquency ratio is a ratio of total amount of overdue loans to total outstanding loans. The ratio provides an indication of asset quality of loan portfolio. Loans overdue refer to loans on which payments of interest and/or principal are overdue for more than three months. Write-off ratio Write-off ratio refers to the amount of RMLs or CRELs written off during the reporting period as a percentage of RMLs or CRELs outstanding. Negative equity Negative equity refers to those RMLs loans with an outstanding loan amount which exceeds the current market value (CMV) of the collateralised property. The latest valuation of the collateralised property by the bank can represent the CMV. - 82 -