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China to limit credit to counter property speculation

BEIJING: China’s housing ministry said it will curb credit for some home purchases to reduce speculation and rein in surging prices.

The nation will “further restrict credit for the purchase of second homes and curb speculative housing investments”, Minister Jiang Weixin said in a statement on the ministry’s website on Jan 6 after an annual work meeting. He didn’t elaborate.

Premier Wen Jiabao pledged Dec 27 to tackle “excessive” real-estate gains in some cities. Prices across 70 cities rose at the fastest pace in 16 months in November, fuelling concern that record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy.

“They are trying to prevent a full-blown bubble,” said Lee Wee Liat, a Hong Kong-based property analyst at Nomura International Hong Kong Ltd. Lee sees potential bubbles in real estate in cities including Beijing, Shanghai, Shenzhen and Guangzhou.

China Vanke Co, the nation’s biggest listed property developer, gained 0.8% to 10.44 yuan (RM5.16) as of the 11.30am local-time break in trading on Jan 6. The stock has fallen 12.8% in the past month on concern that measures to cool the property market will hurt earnings. Poly Real Estate Group Co, the second-largest, added 1.5% to 21.54 yuan, trimming its decline to 15.6%.

Jiang said China will add to stocks of low-cost housing in cities with high prices. The government will also crack down on property hoarding by developers and fake pricing and sales, and ensure that housing demolition is legal, he said.

Xia Haijun, the chief executive officer of Evergrande Real Estate Group Ltd, told reporters in Hong Kong on Jan 6 that the company is “not a developer that hoards land”, as it negotiates with officials in Guangzhou over a site that newspapers said has been repossessed.

The housing ministry and local governments need to “adjust” policies introduced last year, the minister Jiang said, without being more specific.

Developers dropped on Jan 5 the most in two weeks on concern the government will implement a nationwide tax on the value of a property for the first time. Speculation was fueled by a Shanghai Securities News report which said China plans to expand a trial of a real-estate tax, citing an unidentified person close to the State Administration of Taxation.

China won’t introduce a property tax this year because the government wants to keep the real-estate market stable, Hingyin Lee, Colliers CRE plc’s director of research and advisory for eastern China, said at a briefing in Shanghai on Jan 5.

China may raise downpayment requirements for purchases of second homes to 50%, Beijing Business Today reported Dec 21, citing an unidentified person. The current level is 40%, the newspaper said.

Local governments are already tightening property rules. In Shanghai, home buyers must prove they are first-time purchasers before benefiting from a reduced tax on transactions, the city government said Dec 31.

In the south, Shenzhen will start a three-month crackdown on property speculation from Jan 6, China Business News reported, without citing anyone.

Authorities will inspect local developers to determine if they have conducted unlawful activities such as selling apartments before buildings are completed, false advertising and the hoarding of apartments, the Shanghai-based newspaper said on its website.

China’s policy makers are trying to ensure an economic rebound and at the same time prevent excessive liquidity in the financial system from creating bubbles in stocks and property. Liu Mingkang, the nation’s top banking regulator, wrote in an opinion piece in Bloomberg News this week that “structural bubbles threaten to emerge”.

Donald Tsang, Hong Kong’s chief executive, said Nov 13 that he was “scared” that money flowing into Asia because of low interest rates in the US could lead to another crisis in the region. – Bloomberg LP

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