China to raise downpayment for second homes: sources

(BEIJING) China will soon raise the downpayment requirement for people buying their second home to 40 per cent, in an effort to curb speculation in the red-hot property market, banking and regulatory sources said yesterday.

It will also raise to 50 per cent from 40 per cent the downpayment requirement for commercial property like offices and retail space, the sources told Reuters. They did not provide a specific date for the changes, but one official said they would be unveiled ‘very soon’.

‘In order to curb the excessive rises in property prices, the government will on the one hand increase the supply of low-rent flats and on the other hand raise the downpayment requirement,’ said one source.

Annual property price inflation in 70 major cities accelerated to 8.2 per cent in August, with prices going up 20.8 per cent in the southern boomtown of Shenzhen and 12.1 per cent in Beijing. State media said the nationwide rise was a record high.

After the changes, there will be three different levels of downpayment requirements for people seeking mortgages to purchase a home. Anyone buying a second or subsequent home will need to put down 40 per cent; those buying their first home will pay 30 per cent if it is larger than 90 sq m (969 sq ft); and those buying a first home that is for their own use and is smaller than 90 sq m will need to pay 20 per cent.

It will be the second time in about 15 months that Beijing has raised downpayment requirements to try to cool down the property market. The Cabinet raised it for home mortgages to 30 per cent from 20 per cent in June 2006 as part of a package of measures to deter property speculation, exempting smaller, owneroccupied flats.

 

Source: Reuters (Business Times 18 Sept 07)