China told its central bank to raise down-payment requirements and interest rates for second-home mortgages in cities with “excessively fast” price gains as authorities step up efforts to cool the property market.
The central banks’ regional branches may implement the measures in accordance with the price-control targets of local governments, the central government said in a statement on its website today. Cities facing “relatively large” pressure from rising housing prices must further tighten home-purchase limits, according to the statement.
China’s new home prices rose for a ninth straight month in February, SouFun Holdings Ltd. said Friday, 10 days after Premier Wen Jiabao called on local authorities to “decisively” curb real estate speculation and ordered cities with fast price gains to cap the number of homes residents may buy. Wen will be replaced by Li Keqiang in a once-in-a-decade leadership transition at the end of the annual gathering of the National People’s Congress this month.
“This is a final effort by Premier Wen to put a stamp on the direction of policy before he leaves office and the message is clear: there should be no relaxation of property market controls,” Mark Williams, an economist at Capital Economics Ltd. in London, said by e-mail. “This is a sensible policy. Even allowing for the construction slowdown of last year, the real estate sector remains on an unsustainable path.”
Real estate companies found hoarding land or collaborating to push up home prices will be barred from getting new development loans or raising funds from the capital markets, according to the statement.
Tax on Profits
Individuals selling their properties should “strictly” pay a 20 percent tax on the profit earned from the sale whenever the original purchase price is available, according to the statement. The government will also “quicken” an expansion of the nation’s property-tax trials, it said in the statement without providing details.
“In the short term, it will help reduce the transaction volumes of second-hand home sales and somewhat contain speculative property investment,” Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said by e-mail.
The government’s almost three-year effort to curb property prices has included raising down-payment and mortgage requirements, increasing construction of low-cost social housing and restricting home purchases in about 40 cities. Authorities also have imposed a property tax for the first time in the cities of Shanghai and Chongqing.
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