China's central bank and banking regulator yesterday issued a
supplementary notice on the credit management of commercial
properties, clarifying key points in the mortgage policy for those
buying a second apartment.
The notice follows the document on September 27, also jointly
released by the People's Bank of China and the China Banking
Regulatory Commission. The document raised mortgage deposits to 40
percent for second homes.
But what constitutes a second home has been under discussion for
the past few months.
Of the banks that have released rules on individual mortgages,
only China Construction Bank considers the second home purchase on
a family rather than an individual basis. Other Chinese and foreign
banks are considering second home purchases on an individual
basis.
The supplementary notice outlined clearly this time that the
second apartment would be considered on a family rather than
individual basis.
Meanwhile, for those who have bought their first apartment
through a mortgage, they can still enjoy a preferential mortgage
rate only when the size of their first apartment is smaller than
the local average.
Moreover, for people who have used the public housing fund for
their first apartment, the purchase of a second home should also
follow the stipulation in the notice.
"The over-rapid growth of mortgages and illegal behavior of some
banks' mortgage business increase the potential risks," Liu Shiyu,
vice-governor of the central bank, said.
Total default mortgages at the three major commercial banks -
China Construction Bank (CCB), the Industrial and Commercial Bank
of China and Bank of China - rose to 19.2 billion yuan at the end
of 2006 from 18.4 billion yuan in 2005, according to a CCB
report.
"The move shows the regulator's determination to curb
skyrocketing property prices and prevent growing speculation in the
market," an analyst with DTZ, a major real estate service company,
said.
According to statistics from the National Development and Reform
Commission, prices of new residential apartments in the country
rose by 10.6 percent year-on-year in October.
Preventing the bubble from bursting in the property market was
also one of the highlights on the agenda of the just-concluded
Central Economic Work Conference.
Some banks, in fact, have taken a cautious approach to home
loans since the US subprime crisis hit.
Mortgage down payments currently range from 20 to 30 percent for
the first apartment. But in real terms they are 10 percent or even
zero given the inflated prices.
(China Daily December 12, 2007)
