Rumors that the central bank could soon raise the required down payment for home purchases has caused a slump in real estate shares in China.

Some media reported on Thursday that the central bank might soon force buyers to come up with a down payment of 40 to 50 percent of the cost of their home in order to curb the overheated real estate industry.

Currently home buyers have to raise 20 percent of the cost of the purchase price.

The rumors led to a 2 percent drop in the real estate share index in Shanghai Stock Exchange on Thursday, and a slump of 5.2 percent for real estate share index in Shenzhen Stock Exchange, the highest single-day decline since October 2004.

The decline in the real estate index had only a slight effect in the overall Composite Stock Index on the Shanghai Stock Exchange, which dropped less than 1 percent on Thursday. The Shenzhen Stock Exchange fell slightly more than 1 percent.

An official with the central bank said that it had no such plan because the bank had just raised the interest rates by 27 basis points to curb the overheated real estate industry, according to Friday's Shanghai Securities News.

Last year the bank raised the required down payment from 10 percent to 20 percent to discourage speculation in the property market.

Although China's central policy makers have continued their year-long effort to rein in the soaring property market, housing prices in major cities have maintained their upward momentum since early this year.

Figures from the National Bureau of Statistics (NBS) in March showed that house prices in Beijing rose by 8.4 percent in January and 7.3 percent February year on year.

With housing prices at historic highs, it is reasonable for some institutional investors to sell part of their property in a hedge against future risks, the newspaper said.

This may be another cause for the decline in property share prices, it said.

Source: Xinhua