China’s central bank pledged to immediately implement new lending rules to cool real-estate speculation and one of its policy advisers said the market is having its “last madness.”
The central bank commented in a statement on its Web site on Friday night. Li Daokui (李稻葵), a newly appointed academic adviser to the monetary policy committee, spoke in an interview broadcast by state television on Thursday.
Asset-price bubbles inflated by a credit boom could derail the recovery of the world’s fastest-growing major economy, which expanded 11.9 percent in the first quarter from a year earlier. China’s Cabinet, the State Council, announced higher mortgage rates and down-payment ratios for second homes on April 15 after a record jump in property prices last month.
Investors “don’t realize how strong and resolute the political will is among top leaders to curb price gains,” Li said on Central Television.
The market is having its “last madness” and speculation may dissipate in a year or 18 months on extra action by local authorities and an increased supply of low-priced, so-called “policy homes,” Li said.
Under the new rules, down payments for second homes must be at least 50 percent, up from 40 percent, and mortgage rates can’t be lower than 110 percent of benchmark rates, the State Council said. Banks should also raise down payment ratios and rates for third homes “by a broad margin,” it said.
Property prices in 70 major cities surged 11.7 percent last month from a year earlier, the most since records began in 2005, government data showed last week.
In an April 15 statement after the release of first-quarter numbers for GDP, the State Council said that local governments have failed to control speculation. Besides limiting the risk of price bubbles, policymakers want to keep housing affordable.
The government has yet to take another step which could help to cool the property market: raising benchmark interest rates. Instead, officials are targeting a 22 percent reduction in new loans this year from last year’s record of US$1.4 trillion.
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