Local governments in China unveil measures to curb housing loans

Several local governments in China have announced new measures to restrict financing to potential homebuyers, triggering concerns about a fresh wave of tightening for the property sector, Dow Jones Newswires reported on Tuesday.

Word of the measures comes as home prices in major Chinese cities started rising in the second half last year after declining since late 2011 as the central government’s strict property-market controls took effect.

Under the latest measures, Dongguan in Guangzhou province, Jinhua in Zhejiang province and Kunshan in Jiangsu province have all tightened access to financing from their housing provident funds.

Such funds are intended to support first-time homebuyers and generally offer below-market rates for loans.

The new restrictions represent a partial reversal from last year, when some cities looked to soften the central government’s controls by making more financing available from provident funds to help new homeowners.

While these funds are not a big source of financing for the overall housing market, their policies may offer cues regarding policymakers’ intentions. Earlier this month, the Shanghai Securities News reported that major Chinese cities may impose a fresh round of property tightening measures by March.

For its part, Dongguan has lowered the ceiling on the maximum loan for first-time homebuyers to 70 per cent of a home value’s from 80 per cent previously, the Dongguan Housing Provident Fund Management Center said. The new rule took effect on Feb 8.

Jinhua lowered its cap on loans for families to 400,000 yuan (S$79,000) from 600,000 yuan previously, and for individuals to 200,000 yuan from 300,000 yuan. The new caps took effect on Feb 4.

“Demand has exceeded supply, and the waiting list for loans is too long,” the Jinhua Housing Provident Fund said.

Kunshan said it would limit access to its fund and toughen repayment requirements, with effect from Monday.

Source : Today – 19 Feb 2013

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