China Boosts Loan down Payments, Hold Local Government Accountable

The Chinese government has now increased the minimum down payment for second-home purchases, and at the same time, has told local governments to set price targets on new properties. Our Wang Jing has more on the latest move to rein in red-hot property market.

The State Council now says that the down-payment ratio for a second home will rise to 60 percent from 50 percent.

It is also asking local governments to boost the land supply, and says they should set price targets for newly built houses based on regional economic growth and disposable incomes.

The Chinese authorities have been trying to rein in the red-hot property market since late 2009, and have rolled out a raft of measures, including raising down payments, raising mortgages for third home purchases, and restricting loans to developers.

But this is the first time that the central government has made clear that the local government bureaus will be held accountable if home prices keep rising.

Professor Wang Lina is from the Chinese Academy of Social Sciences.

"The central government has implemented so many policies, but many of those are short term ones without an overall strategy. The revenue system in China is not appropriately set up. The central government has the biggest share of the tax revenue while local governments don't get much. As such, many local governments have to rely on selling land to get revenue. So without solving the fundamental problems, China's real estate problem will continue to exist."

The State council also says land for affordable housing, the reconstruction of shantytowns, and small and medium commercial houses should be no less than 70 percent of a regional government's total supply.

The government has also the interest rates for second-home mortgages at no less than 110 percent of the benchmark rates, and says people selling homes within five years of buying them will be charged the full transaction taxes.

Property prices in China rose for a 19th consecutive month in December.

Premier Wen Jiabao has said that the government will "resolutely" implement controls on the real-estate market in the first quarter, including curbing speculation and increasing the supply of affordable housing.

For CRI, I'm Wang Jing.