Saturday, May 1, 2010

Beijing limits buyers to one new apartment

Banks will also refuse loans to people who haven't paid taxes and made social security contributions for at least a year

THE Chinese capital Beijing has issued rules limiting families to one new apartment purchase as authorities try to rein in rampant property speculation and soaring prices, state media said yesterday. 'For the time being, one family can buy only one new home in the city,' China News Service said, citing the municipal government.

Beijing authorities also ordered banks to refuse home loans to people who cannot prove they have paid taxes and made social security contributions in the city for at least one year, the report said.

Banks also have been told to block mortgage applications for people buying their third property, but it was not clear in the report whether this would affect only residents in the capital or others as well.

The rules marked the latest in a series of measures by Chinese authorities as they seek to reduce the risk of the red-hot property market overheating and derailing the world's third largest economy.

Prices in major cities rose 11.7 per cent year-on-year last month, the fastest pace since a nationwide survey was widened to 70 cities in July 2005, official data shows.

At the Beijing Real Estate Expo earlier this month, the average price of a new apartment in the Chinese capital was 21,164 yuan (S$4,240) per square metre - double that of last year, state media said. That means a 90 sq m (970 sq ft) apartment in Beijing would cost 1.9 million yuan, compared with the average per capita income of 17,175 yuan in 2009.

Beijing's government pledged to step up efforts to reclaim land left idle by property developers to combat land hoarding and make the space available for 'ordinary housing'.

Authorities also will investigate property developments charging excessively high prices.

In the past two weeks, China has tightened restrictions nationwide on advance sales of new property developments, introduced new curbs on loans for third home purchases and raised minimum downpayments for second homes.

Banking regulators have also told lenders to conduct quarterly stress tests on mortgages as the government seeks to clamp down on bad loans.

This week, state media said China was likely to introduce a property tax on residential housing in the first half of the year on a trial basis in Beijing, Shanghai, southwestern Chongqing and the southern city of Shenzhen.

China lacks a nationwide database on property sales, which means banks have no way of checking if mortgage applicants already own apartments in other cities. And higher downpayments will have little impact on speculators who mostly pay the full value of properties in cash. -- AFP

Source: Business Times, 1 May 2010

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