Economy

Beijing unveils tough measures to curb housing price rises

(Xinhua)
Updated: 2010-05-01 09:45

BEIJING: Beijing banned all families from buying more than one home Friday, in a tough set of restrictions designed to curb speculation and soaring home prices.

As of Friday, "one family can only buy one new apartment in the city for the time being," the municipal government said in a statement.

The government also ordered the implementation of central government policies that ban mortgages for purchases of a third or third-plus home.

It also instigated a central government ban on mortgages to non-local residents who cannot provide more than one year of tax returns or proof of social security payments in Beijing.

The statement called for "resolutely curbing unreasonable housing demand." It ordered the implementation of measures earlier unveiled by the State Council on second-home purchases.

The municipal government said banks can use a government housing transaction database to check on second, third and third-plus home purchases.

The Chinese cabinet unveiled a set of measures this month to clamp down on speculation amid fears of economic overheating and property bubbles inflated by last year's record lending. High home prices have become a major concern for the Chinese.

The Cabinet has raised minimum down-payments and lending rates for second-home purchases. Moreover, property developers have been ordered to get official approval before accepting pre-payments for uncompleted homes and will be punished if they are found to be hoarding property to push up prices.

Beijing also pledged to increase the supply of low-cost housing and has banned shareholders from applying for loans and providing finance and guarantees for property developers.

Local government agencies have been called to "fully understand the harmful effects of overly fast rises in home prices for the sake of economic growth and social stability in the Chinese capital."

The government has also ordered an investigation into property projects that witnessed overly high sale prices or overly rapid rises in price.

The latest measures, more harsh than those released by the State Council, are aimed clearly at curbing speculation and promoting healthy and stable development of the property sector, Chen Zhi, deputy secretary-general of Beijing Real Estate Association, told Xinhua.

Speculation is the main reason behind high home prices in Beijing, Chen said.

"There exists a rather big bubble in the city's real estate market. Housing has become more unaffordable for many," he added.

Fitch Ratings said the recent policies are expected to moderately cool market sentiment, in line with the government's goal of deflating bubbles and ensuring the property sector's long-term healthy development.

"The recently announced policies of curbing lending on second or additional residential property purchases will reduce demand from investors and speculators who may find it more difficult to finance their purchases," said Michael Wu, a director in Fitch's Asia-Pacific corporate team.

The measures will curb housing demand and reduce medium and long-term risks for China's economy and the financial sector, Ha Jiming, chief economist at China International Capital Corporation, said in an emailed note.

But more reasonable lending rates are needed to deflate housing bubble in the long term, Ha added.

Home sales in some major cities have started declining as potential home buyers expect price falls in the wake of the tightening measures.

In the week ended on April 25, sales of new homes in Shenzhen tumbled 60 percent from the previous week.