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China tightens home lending rules

11 January 2010 Reporter

Amid growing concerns of an impending housing bubble, China is expected to announce its plans to tighten home loan guidance.

The world’s third largest economy will seek to restrict speculative capital – also known as ‘hot money’ arriving from overseas and illegally entering the country’s property market by ramping up property lending supervision.

The State Council of the People’s Republic of China announced that the revised home loan guidance will result in increased monitoring of home loan flows, to counter over-inflated price gains in some cities.

The Home-Loan Guidance listed 11 specific measures which will be undertaken in increasing supply of low-cost houses for low-income families and common residential houses, encouraging reasonable house buying while restraining purchases for speculation and investment, strengthening real estate project loan risk management and market supervision, speeding up construction of housing projects for low-income households, and specifying responsibilities of local governments.

The State Council also reaffirmed the requirement for borrowers to make a 40 per cent deposit for second homes, and said the government authorities will increase monitoring, after some speculation the requirement would increase to 50 per cent.

The State Council’s statement also quashed speculation that a property tax would be introduced for the first time.

The reforms follow a statement by Premier Wen Jiabao in late December last year to tackle “excessive” real-estate gains in some parts of the nation.

China tightens home lending rules
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