With a significant amount of properties being purchased in China, the central government has initiated measures to try to curb sales. Last week they increased the minimum down payment needed for the purchase of a second home from 50 to 60 percent of the property’s value.
Premier Wen Jiabao announced this after a meeting of the State Council. He stated that additional measures are needed to try to cool down the flourishing and fast growing property market.
Because of a levy property tax on new housing, many residents are hurrying to purchase homes now because home prices are increasing very quickly. There are also complaints from the public, which is causing the government to take some action to try to make a positive impact on the property market.
Beijing has been concerned with the market since last April and has enforced tightening policies since then. They have increased interest rates on second and third homes and have restricted sales.
China does not want the same thing to happen in their country that happened in America’s property market in 2008. The sub-prime mortgage style financial crisis in America has China “macro-controlling” their own market carefully.
The State Council reports that tax policies will continue to be tightened and tightening measures will continue. China’s central bank is at liberty to increase down payment ratios and mortgage rates on second homes in effort to keep things cool. Local governments are encouraged to be responsible for their own healthy growth of their property markets.