Commercial banks in China can now refuse borrowers who are purchasing their third homes in areas severely affected by increasing property prices.
The new measure, which some analysts believe could cool down China’s sizzling property market, was issued by the State Council, the country’s Cabinet.
In areas with soaring property prices, the municipal and provincial government can also temporarily limit the number of properties people can purchase, in accordance with the condition in their jurisdictions.
Additionally, according to a statement from the central government, banks can also halt loans to those who cannot prove that they had paid taxes and lived for at least one year in areas where they intend to purchase houses.
Chen Yunfeng, secretary-general of the China Real Estate Managers Association, said: "With a sound implementation, these policies can instantly cool down the real estate sector and even lead to a big price drop in some regions."
The top management of a property project in Beijing’s Tongzhou region, where property prices had increased the most over the past few years, has decided to reduce its sale price by 3,000 yuan or about 10 percent after the policies were implemented.
Meanwhile, some property buyers have decided to take a wait-and-see attitude instead of rushing to purchase an apartment.
"Buying a house right now would not be different from buying shares at the record high of China’s stock market," said Wang Liang, a company executive in Beijing. "I would wait to see how these policies could change the market."
According to Grant Ji, director of UK-based real estate service provider Savills (Beijing), the central government measures target speculative house purchases, which are regarded as a primary factor that drives up property prices. The policies also indicate the government measure to curb excessive property growth, as well as prevent growing financial risks.
The central government increased the required downpayment for a family buying a second house, from the existing 40 percent to 50 percent. This move would not only restrict speculative house buying but also reduce potential risks in banks, if property prices continue to decline.
"The prices of houses and land in some cities have recently seen overly rapid increases and speculative purchases have become quite active again," said the central government in a statement.
"All regions and related agencies must fully recognize the harm of overly fast rises in property prices and take resolute measures to contain (them)."
The implemented cooling measures had come on the heels of the acceleration in urban property inflation to 11.7 percent last month from 10.7 percent in February, the biggest year-on-year increase since the Bureau of Statistics widened its coverage to 70 cities in July 2005.