High housing prices in major Chinese cities have become a big concern to the Chinese government as it tries to control the macro-economy.

To maintain the healthy development of the country's real estate market, the government has released a number of new measures aimed at curbing house price surges. Higher interest rates and stricter land-use restrictions are central to these measures.

Last year, house prices increased by 15 percent on average across the country, leaving those earning ordinary wages sighing over the growing distance between their dreams of owning their own homes and the tough reality.

Analysts say that a real estate market manipulated by developers runs against the government's goal of building a harmonious socialist society in China.

With the implementation of the new measures, individual buyers and developers will have to pay 20 basis points more in loan interest to lenders. In some places, the homebuyers will also have to factor in a higher initial installment in their entire mortgage plans.

Yi Xianrong, director, Institute of Finance, China Academy of Social Sciences, said, "Although the interest rate increase is slight, it's sending a clear signal to the public that the central bank may change interest rates in the future. Those who have already bought houses using mortgages have to consider how to deal with the change. Potential buyers have to take into consideration the risk of interest rate fluctuations."

On the other hand, the central government has decided to tighten land supply for luxury housing projects and increase supply for affordable projects. Developers involved in speculation, leaving land in their hands undeveloped and waiting for higher land prices will face the full force of the law.

Yan Jinming, Vice Director of Department of Land Resource Management, Renmin University , said, "In the current market, developers are in control of too much land. And some individual buyers are keen to speculate by buying several houses."

To curb speculation in the real estate market, the government is also considering raising the tax on transactions of second houses or apartments.

(CCTV.com April 8, 2005)