China Curbs Lending in Move to Cool Housing Market

Thursday, 30 Sep 2010 06:32 AM

 

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China is imposing fresh restrictions on lending, and rolling out a new tax on real estate transactions in some major cities, in its latest effort to cool the red-hot housing market.

The measures include a 30 percent down payment for a mortgage on a first home purchase, up from the previous 20 percent. Purchases of second homes require a 50 percent downpayment, up from 40 percent.

In line with many investors' expectations, the government also said it would introduce a trial property tax in some major cities. Shanghai, Beijing, Shenzhen and Chongqing are expected to be among the cities where the tax will be rolled out first, state media have said.

Loans for purchases of third homes are banned, said the announcement on the government's website.

"The housing problem affects people's livelihood and apart from being an economic problem also affects social stability," it said. "Excessively high housing prices make it difficult for families to find homes, increase financial risks and are an obstacle to coordinated economic development."

Authorities have sought repeatedly to cool the market by discouraging housing purchases for investment purposes, particularly speculative buying, that has helped drive prices out of reach for many city dwellers.

The newest actions followed news that real estate dealings had surged since mid-August, pushing prices higher. Overall, housing prices in 70 major Chinese cities rose 9.3 percent in August from the year before.

In some cities prices are spiking to new records: The average price per square meter for an apartment along Beijing's Fourth Ring Road, on the city's outskirts, is about 34,000 yuan (nearly $5,100), according to city government statistics.

That compares with an average annual per capita income of less than 30,000 yuan ($4,500) and much more modest income of 12,000 yuan ($1,800) per capita for the lowest fifth of urban dwellers.

The government is also seeking to discourage property developers from hoarding land, or newly built housing, thus constraining supply, while waiting for prices to rise further.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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