Chinese School - No relief in sight on realty prices

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BIZCHINA / Review & Analysis

No relief in sight on realty prices

By Chen Weihua (China Daily)
Updated: 2007-08-22 11:30

Rising housing prices and changing policies have brought both angst and
excitement to homebuyers in Shanghai.

Many new buyers are talking to agents to revise contracts after the local
government recently announced that first-time homebuyers can borrow up to
500,000 yuan from the city's housing fund from September 1.

The loan, which carries a relatively low interest rate, is currently
capped at 300,000 yuan.

The new policy will be a relief for homebuyers that have to take out
hefty commercial loans to finance purchases.

Many of the city's homebuyers jokingly refer to themselves as "mortgage
slaves", because most of their salaries are used for loan repayments. But
this situation is not going to change much for those who borrow ?under
20- to 30-year terms.

Many homebuyers have been waiting for the last two years for prices to
come down, after a number of policies were introduced to rein in the
red-hot property market.

But as housing prices in Shanghai and most Chinese cities continue to
rise, they could be waiting in vain. "And there is absolutely no sign
that the prices will go down," said Li Zong, from a local real estate
company.

"It actually costs more now to buy a small apartment in Pudong because
the price has shot up from 15,000 yuan per square meter last year to
17,000 yuan," said Xiao Lu, a woman in her early 30s.

As housing prices continue to go through the roof, reports that some
cities might raise the down-payment ratio from 30 percent to 40 or even
50 percent are causing many panics.

In fact, cities such as Shenzhen in Guangdong Province and Wenzhou in
Zhejiang Province have already tightened up lending on home purchases.

But the Shanghai head office of the People's Bank of China has dismissed
any increase in the down-payment ratio.

Unlike Wenzhou and Shenzhen, banks in Shanghai have shown no sign of
cutting back on mortgages.

High land prices and the enthusiasm of local and overseas investors in
Shanghai's real estate market have pushed the city's property prices,
especially in the downtown area, to rise at a rapid pace in the last few
months and many believe it's set to continue.

(For more biz stories, please visit Industry Updates)

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