China tightens control on housing investment

Beijing has raised the down payments for Chinese families buying a second home, and shut the door completely for mortgages on third homes, tightening control on a bubbling property market to avoid any mishaps of a US-style financial meltdown in China.

Economists and market analysts say the harsher lending measures on home ownership and investment, taking effect on October 1, are aimed to prevent prices from growing to untenable highs, which, if crashed some time in the future, would short cut the country’s economic growth pattern, and bring about a severe recession.

The new measures, made public on the government’s website and announced by the state TV station, CCTV, also include languages that Beijing is considering expanding property tax, which is now tested in some localities, to nationwide. The tax, if imposed, will chill frenzied housing investment and speculation in China.

Now, homeowners buying their first housing need to pay 30 percent down payment, instead of the previous 20 percent. The requirement for buying a second property was raised to 50 percent from 40 percent. And, all the lenders are forbidden to provide loans to home investors seeking a third or more property.

The harsher measures came just two days after the ministries of land and resources and housing and urban-rural development vowed to crack down on property developers hoarding land.

The ministries said on Monday that developers who had land idle for more than a year will be banned from bidding for new land slots.

Housing transactions in China's major cities, including Beijing, Shanghai and Shenzhen, showed a considerable rebound since mid-August, with a number of projects increasing selling prices.

The price rises, analysts say, have alarmed the central authorities in Beijing, who intervened in mid April by spelling out a 10-measure policy reining in housing investment and speculation in China market.

Despite some concerns that stricter control on the property market could cause a cooling housing sale, and a depleted housing project investment, which will translate to a slower economy, the policy-makers in Beijing seem determined to clamp down on price bubbles, which could bring potentially disastrous implications for China’s economy.

By People's Daily Online