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Pawn one property to buy another

(BEIJING) As bank loans for property dwindle, an increasing number of prospective buyers are turning to pawnshops to finance their plans.

Wang, a 40-year-old Beijinger, owns an apartment worth about 700,000 yuan (S$136,000) in the capital.

His desire to move to a larger second-hand apartment worth about one million yuan hit a snag when the owner demanded payment in full. Wang, however, only had slightly more than 600,000 yuan.

People who have already bought houses with a bank loan are required to make a downpayment of 40 per cent of the purchase price. And the loan interest rate should not be lower than 1.1 times the central bank’s benchmark rate.

With the new rules blocking his dream, Wang turned to a pawnshop. He chose to mortgage his first apartment for 400,000 yuan with Beijing Huaxia Pawnshop Co.

He then registered with a real estate agent to sell his first apartment. He soon made a deal where the buyer agreed to give him a downpayment of 400,000 yuan. With the money, Wang paid off his pawnshop loan and ended up buying the larger apartment without a bank loan.

Li Tiejun, a Beijing Huaxia Pawnshop Co manager, said that since the banks had tightened the rules for loans on second apartments, real estate loan volume at his pawnshop had soared 40 per cent.

Likewise, Xu Yunpeng, manager of Beijing Bao Rui Tong Pawnshop, claimed its trade volume in real estate had risen 30 per cent since September.

Some pawnshops advertised for potential customers by claiming that they would give out money for mortgages within three to five days.

 

Source: Xinhua (Business Times 8 Dec 07)

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