China's largest city has enacted a new rule requiring home owners to pay off their mortgages before selling property, the boldest measure yet in new efforts to cool surging real estate prices.
The new regulation, which took effect Tuesday, requires property owners to pay off their entire mortgage before transferring a deed to a buyer, an official at the Shanghai Housing and Land Administration Bureau said yesterday.
Property owners can still sell if they find a buyer willing to put down the entire balance of the mortgage as a down payment to pay off the loan.
The official at the Housing Bureau, who refused to give her name, said the policy was aimed at preventing speculative property transactions, the main engine behind the double-digit increases in average real estate prices in Shanghai in the past few years.
In another new measure, the Shanghai government is extending the waiting period between the sale and transfer of ownership for property to 28 days from the previous seven, the bureau said in a statement. The changes reflect worries that property prices are being driven unmanageably high, risking financial problems and pricing many residents of this city of more than 20 million out of the market.
"The government is duty-bound to make resolving the housing difficulties of the common people, especially low and middle-income families, its responsibility," mayor Han Zheng (
Authorities face the dilemma of looking after the city's poor while also protecting the interests of property owners who make up an increasingly large part of the population.
The government has announced plans to build 20 million square meters of new apartments for low-income families and to set up a low-rent housing system. To discourage the speculative dealings that have driven prices skyward, the city last month decreed a 5.55 percent capital gains tax on sales of property within a year of purchase.
Among other credit-tightening measures, the interest rate charged on mortgage loans of more than five years has been raised to 6.12 percent from 5.31 percent.
The measures are too recent to have had much impact so far.
Property prices in Shanghai rose nearly 16 percent last year. Many other cities also have seen similar increases. Prices in choice downtown areas have risen far faster.
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