China Suspends Loans to Third Home Buyers

China Suspends Loans to Third Home Buyers, amid new move to cool down property market

English.news.cn 2010-09-29 19:14:05 FeedbackPrintRSS

BEIJING, Sept. 29 (Xinhua) -- China will suspend bank loans for third home purchases in the near future as the government moves to enact further measures to check soaring property prices, Xinhua learned Wednesday.

Property tax pilot programs will be stepped up and then extended to the entire country, sources within several departments of the central government told Xinhua Wednesday.

Further, all first-home buyers will have to pay a down payment of at least 30 percent of the purchase price, according to the new rules.

Previously, based upon rules issued on April 17, only first-time buyers purchasing an apartment above 90-square-meters in area had to pay a 30 percent down payment.

For second home buyers, the policy will remain unchanged: a 50 percent down payment and a home loan interest rate no less than 1.1 times the benchmark interest rate.

Further, officials will be held responsible if they fail to implement the new policies.

China will also halve the contract tax for buyers of ordinary homes that are used as the sole residence of the family, and if the homes bought are under 90 square meters in area, the tax rate would be reduced to 1 percent, China's Finance Ministry said in a statement on its website on Wednesday.

Additionally, for those who sell their homes and buy new ones within one year, there would not be any reduction or exemption on personal income tax on the profits from their sales.

The new tax rules would come into effect on Oct.1, according to the State Council.

The new rules are meant to "strengthen property market regulation and enhance the implementation of the existing policies," so as to "stabilize home prices and boost the stable and healthy development of China's real estate market," said Shen Jianzhong, director of the Department of Housing and Real Estate Supervision in the Ministry of Housing and Urban-Rural Development (MOHURD).

"The new rules basically fully carry out the ten rules issued on April 17 to cool the property market. Still, some requirements go even beyond the previous ones," said Yang Hongxu, an analyst with Shanghai-based E-house China Research and Development Institute.

"Under the new rules, lending to third home buyers is banned across the country, instead of just in some cities with high home prices," Yang said.

The new rules require lenders to step up monitoring of "consumption loans," to ensure they are not sneaking into the property market, Yang added.

Moreover, if cities are suffering from soaring home prices and strained supply, limits may be imposed on "the total number" of properties bought by a single family, according to the new rules.

"This requirement is tough and can be applied in cities like Shanghai, Beijing, Shenzhen and Hangzhou. It may limit a purchaser to buying no more than one apartment within a certain period of time," said Yang.

Su Xuejing, an analyst with Changjiang Securities Co. Ltd., said, "The new rules do not exceed our expectations. We expect more tightening policies, with details to come over the next day or two."

The new rules also reaffirmed support for construction of affordable housing, urging the implementation of plans on land supplies and constructions for ordinary commercial homes, as well as affordable ones.

Data from the MOHURD showed that by the end of August, the construction of 4.1 million units of affordable housing has started nationwide with a total investment of 470 billion yuan ($70.15 billion), accounting for 70 percent of the annual construction schedule and 60 percent of the investment schedule.

It is pledged that commercial banks should continue to "support loans on the development of ordinary homes and affordable housing,"while drafting policies to support public rental housing construction with mid- and long-term loans.

"It takes a long time to profit from public rental housing projects, which definitely requires the help of mid- and long-term loans," said Hou Ximin, director of the Department of Housing Security under the MOHURD.

Yang said China's property market would be more subdued in October than September, adding that property trade volume over the coming months would be down compared to August and September.

Of note, Chinese property stocks closed down on Wednesday.

The sector dropped 1.01 percent, with only 22 of 150 properties registering a rise, according to a Dazhihui index, a widely-used stock analysis tool.

China Vanke Co., the nation's largest listed property developer, dropped 1.01 percent to 7.81 yuan per share.

(Xinhua News Agency September 29, 2010)