China's Cabinet took aggressive steps yesterday to cool off one of the hottest parts in the red-hot economy, ordering measures to restrain soaring housing prices and discourage real estate speculation.
The new measures by the State Council included tighter lending standards and higher minimum down payments. They came only a week after banks were told to favor families buying their first homes and to cut back on lending to investors in expensive luxury villas and apartments.
The latest steps were taken to "promote the healthy development of the real estate market," the State Council said in an announcement carried by the official Xinhua news agency.
China's leadership has periodically tried to rein in the economy, which has galloped along at about 10 percent growth for each of the past three years. Last month, the government called for renewed efforts as investment in housing, factories and other fixed assets rose, prompting fears that banks were lending carelessly and could end up with bad debts.
Housing prices have been a particular concern because their rapid climb is touching off resentment among working-class Chinese and widening a politically volatile gulf between China's rich and poor.
The government says housing prices rose by an average of 5.5 percent in the first three months of this year, compared with the same period last year. But in areas increases are much greater.
Under the latest measures, developers are required to charge down payments of at least 30 percent, up from the previous minimum of 20 percent, according to the announcement.
It said low-income families can still qualify for the 20 percent level for properties smaller than 90m2.
In addition, developers will now be required to supply a minimum of 35 percent of the capital for new properties, the announcement said, without giving the earlier level.
Owners who sell a property less than five years after purchasing it will have to pay tax on their proceeds, up from a previous two-year limit, Xinhua said.
It didn't say how the tax would be calculated.
Real estate has been one of the most visible signs of China's growing wealth gap.
The government is eager to encourage private home ownership.
But the surge in construction has fueled social strains as farmers and factory workers are evicted to make way for luxury apartments and walled villa compounds for an elite and small middle class who have benefited from two decades of capitalist-style economic reforms.
Thousands of protests, some of them violent, have been reported in areas throughout China over complaints that displaced villagers receive little or no compensation for seized land.
Chinese banks reported total outstanding loans of 20.6 trillion yuan (US$2.6 trillion) as of the end of March, up 14.7 percent from the same time last year, the government newspaper China Daily said last week, citing official figures.