Shanghai Daily news

Construction of 10 million square meters of "budget" apartments priced below 3,500 yuan a square meter will commence this year.(Photo: www.shanghai.gov.cn)

Shanghai's commercial banks said yesterday they've agreed to raise interest rates and down payments on speculative home loans and enact other policies designed to support government efforts to rein in escalating property prices.
Also yesterday, city housing authorities revealed plans to build 20 million square meters of apartments for low- and medium-income residents.
With average residential housing prices soaring 25 percent to 8,756 yuan (US$1,058) a square meter in 2004, Shanghai recently initiated a series of measures to prevent a speculative property bubble and ensure affordable housing for its citizens.
In a statement released yesterday by the Shanghai Banking Association, the city's 16 commercial lenders, including China Construction Bank and the Industrial and Commercial Bank of China, said they are raising interest rates and down payment requirements for applicants who already hold two or more mortgage loans. The figures were not specified.
The banks have also agreed to stop providing mortgage transfers to people selling their property within the first year of purchase.
"The new rules are aimed at fostering the development of a healthy real estate market and housing loan sector in Shanghai," said the banking association statement.
Most commercial banks have already started to charge 6.12 percent interest on five-year-plus mortgage loans for the purchase of a second home, compared with 5.51 percent for a first mortgage.
China lifted the benchmark rate for mortgage loans with maturities of more than five years from 5.31 percent to 6.12 percent earlier this month, following an increase from 5.04 percent to 5.31 percent last October.
Early this month, the city imposed a 5.5 percent capital gains tax on properties sold within the first year in another effort to discourage speculative investment.
But for many local residents, even if the growth in property values slows, prices are already out of reach.
One of Shanghai's major goals this year is to create more housing for common wage earners.
Under the government's blueprint, construction of 10 million square meters of "budget" apartments priced below 3,500 yuan a square meter will commence this year.
These homes will be used primarily for families relocated by urban renewal projects.
The government also plans to begin the construction of 10 million square meters of even lower priced flats by the end of the year, according to the blueprint. Buyers will have to satisfy income requirements to qualify for these units.
"Any steps the government takes to increase the amount of residential space for mid- to low-end families are welcome," said Michael Hart, head of research at Jones Lang LaSalle China (North).
Other real estate experts agreed with the need for a multi-tiered market.
"Residential housing prices should be differentiated to meet demand from different income groups," said Lina Wong, managing director of Colliers International East China, a real estate consulting firm.
But experts said the government needs to exercise caution as it tries to cool what it considers to be an overheated market.
"Jones Lang LaSalle's view is that the government can focus efforts on making the real estate market as fair and transparent as possible but should allow buyers and sellers to make decisions about what to buy and where," said Hart.
Shanghai has been taking steps since last year to make housing sales and project information available online and has already prosecuted some firms and individuals that abused the system.
"In the end only the market can regulate itself, and as long as potential buyers and builders have enough information available to make good decisions, the property market will be a healthy one," said the researcher.