Banks continue to tighten mortgage lending, particularly in the secondary market The mainland's macroeconomic measures continue to take a toll on the real estate sector, with banks extending loan restrictions on development projects, luxury units and mass housing. Banks in major cities such as Shanghai and Hangzhou are tightening mortgage lending for individual buyers of second-hand homes, which carry higher investment risks than primary flats. Centaline (China) general manager Phinex Wong said mainland banks had restricted loans for development projects and luxury properties when the credit tightening started. However, the credit squeeze had since been extended to individual property buyers. 'In the past two months, we have noticed that banks have been following tough lending guidelines when granting loans to buyers of second-hand flats or units for investment,' Mr Wong said. Property agents said loans were being granted at 70 per cent of property values, from 80 per cent previously. The move follows new guidelines recently issued by the central bank that require banks to manage lending risks better. The Bank of Shanghai has since July tightened the loan-to-value ratio for an applicant's first flat to 70 per cent. The ratio falls to 60 per cent for a second unit. No loan will be granted for a third. Industrial Bank's Shanghai branch has strictly imposed restrictions on second-hand home lending since April. A bank executive said: 'If people are really interested in getting loans [from banks], they can try. But it's very hard to get loans now.' Pudong Development Bank said it would not grant loans for homes of more than eight years old. In Guangdong, Industrial and Commercial Bank of China provides loans for second-hand homes at 70 per cent of the value, but they must be less than 20 years old. At Hua Xia Bank in Guangzhou the maximum loan-to-value ratio is 70 per cent. Compared with Shanghai, banks in Beijing have not imposed serious credit-squeezing measures. An official at Citic Industrial Bank in Beijing said the bank had not changed its lending policy because speculative activity was not as hot as in other cities, including Shanghai. Agents said the Wenzhou-based 'property speculation tour groups' had driven up prices of residential property in Shanghai over the past three years through their aggressive acquisition of large blocks of mid-range to high-end Shanghai properties. Home prices in Shanghai are estimated to have risen 75 per cent in the past three years. Mr Wong said home sales had not declined much because the tightening measures on individual mortgage lending had just started. But negative effects would be felt in the fourth quarter if the credit squeeze continued. He said the knock-on effect would be felt by property agents, who expected business to fall as home sales declined. 'We have not felt the impact [because] commission incomes did not decline. But it may happen if home sales fall.' He did not rule out the possibility of cutting back staff to save costs.