China has announced that it would take further measures to cool down its housing market amidst growing concerns over asset bubbles forming in Asia.
Beijing will take a stricter view of whether homebuyers are buying a second home, said a report by Reuters.
Homebuyers of a second home in China are now required to pay a higher down payment compared to those purchasing a first home. Regulators previously looked at whether homebuyers had an outstanding mortgage debt to determine if their new purchase was a “second-home”.
However, according to the report, Mr. Yang Jiacai, director at the China Banking Regulatory Commission, noted that regulators would now check if buyers already owned a house, regardless of whether it was fully paid or not.
Mr. Yang also said that Beijing may need to take further measures to dampen the property market, like tax adjustments, as the recent measures may only have limited impact.
The government’s move came after the International Monetary Fund (IMF) warned in a recent report that the strong rebound in home prices in several Asian economies may create property bubbles.
According to the latest Global Financial Stability Report released by the IMF, the average home prices in several East Asian countries have increased more quickly than rental rates. This is a typical feature of housing bubbles, in which people purchase properties as an investment rather than living in it.
If the Asian housing market keeps booming without moderation, it may threaten financial stability, as many banks will be at risk if a bubble forms and bursts, and home valuations come crashing down.
The IMF said that governments in the region have been taking further measures to cool down their property market. In Singapore, the government has reduced the maximum loans available for private homes, tightened rules on speculative purchases and increased land supply.
However, the IMF said the effects of these measures may take several quarters to be felt, and the government may also need to “fine-tune their policies” to prevent a bubble from forming without affecting the economic recovery.
Many financial industry players and economists have been raising concerns about the formation of Asian property bubbles for months now.