Higher down payment limits for second home seen pressuring buyers

The Beijing municipal government strengthened policies against the speculative buying of residential apartments on Friday to stabilize the housing market, including increasing the down-payment requirements for buyers of a second home from 50 percent to 60 percent of the full price.

Buyers of a second home, according to the new policies, are defined as those who have a record of residential property ownership, or have a record of a mortgage, while in the past only those who have had a record of mortgage were defined as buyers of a second home when they applied for a new mortgage.

This means that more buyers would be defined as buyers of a second home and would be subject to higher down-payment requirements, and possibly face more financial pressure.

Buyers of non-regular second homes in Beijing - defined as those with space exceeding 140 square meters each - must pay up to 80 percent of the home price as down payment. This would be the highest of all the cities in China, according to a circular released at a briefing jointly held by Beijing housing authorities and banking regulators.

The down-payment requirement for non-regular second homes in Beijing used to be 70 percent.

The housing authorities in Beijing said that the city is set to grow and that land supply for housing projects would be expanded to ensure the average price of newly built apartments would not grow higher month-on-month.

Analysts said that the new policy would put more financial pressure on buyers who would like to purchase another residential property. Buyers who are looking to buy their first home ever would also be affected.

Zhang Dawei, chief analyst with Centaline Property, said that the new policies would affect Beijing's housing market significantly, particularly the pre-owned home and luxury-home segment.

Zhang said: "People who sell one apartment and buy another one will be defined as buyers of a second home and have to pay higher down-payment. This would curb the transaction of pre-owned homes, as well as housing price growth in the sector."

In the past few months, pre-owned house prices in Beijing have been rising fast, due to a lack of assets and people panicking to buy amid fast-rising prices.

Zhang said: "A higher threshold for financing would limit the demands for second homes. Expanding new supplies will also help to reduce speculative demands."

Higher down-payment requirements and more financial pressures should force prospective homebuyers who wish to immediately upgrade their housing to think twice about their actual needs, said Yan Yuejin, research director at the E-house China R&D Institute.

China's leadership has been reaffirming the importance of curbing speculation and stabilizing house prices in top-tier cities in recent months.

Tightening lending policies to curb leveraged buying is a widely used practice in first-and-second tier cities.

By Friday, the down-payment requirements for buyers of second homes in Beijing, Shanghai and Shenzhen were 70 percent or more of the asking price.

wuyiyao@chinadaily.com.cn