Economy

Third-home mortgages back in some big cities

By Wang Xiaotian (China Daily)
Updated: 2010-07-13 09:24

BEIJING: Banks in some major cities have relaxed restrictions on handing out mortgages to third-home buyers, arousing speculation over possible changes to the government's tight policy stance on the overheated real estate market.

After banks in Shanghai, Nanjing and Hangzhou started to give out loans, their counterparts in Beijing and Shenzhen also reopened the business to lend money to those who wishing to buy a third home.

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Almost all these lenders added requirements such as down payments of no less than 50 or 60 percent of the total home price, and a lending rate ranging from 10 percent to 20 percent higher than the benchmark interest rates.

Zhu Baoliang, an economist with the State Information Center, said the loosening move was in accordance with the real estate market rules set by the central government in April, and did not indicate a change of direction in macroeconomic regulation.

The central government raised the required down payment limit for a family purchasing a second home from 40 to 50 percent on April 15, its latest measure to curb soaring property prices and prevent growing financial risks, but did not issue specific rules on loans for third homes.

However, local governments in first-tier cities that witnessed the most dramatic rise in home prices, such as Shenzhen and Beijing, restricted mortgage loans for purchases of third homes.

"Removal of the restrictions is quite natural," said Li Wei, an economist with Standard Chartered Bank.

He said that when the new rules took effect, banks hesitated to lend money because the authorities demonstrated a strong resolution to cap speculative real estate purchases, "but as time went by, they've been seeking opportunities to lend more money and make more profit".

Li said tacit permission from the government side indicated it has softened its attitude to implement former excessive restrictions but till now there had been no sign of increased flexibility.

Both Zhu and Li said it was unlikely that the government would loosen its regulation of real estate sector, although the nation's economic growth was already showing signs of a slowdown.

"Easier policies could be adopted to every aspect in the next half year except for real estate," said Qiao Hong, China economist at Goldman Sachs.

In May, China's industrial output rose 16.5 percent year-on-year, 1.3 percentage points lower than April.

From January to May, it fell down 0.6 percentage point compared with the January-April period while urban fixed-asset investment dropped 0.2 percentage point.