The mainland is expected to tighten lending for the purchase of second homes as it imposes tougher measures to rein in soaring property prices, a move that agents believe could trigger a 30 per cent fall in transactions this month. Their forecast came yesterday after Housing Minister Jiang Weixin said the government would 'further restrict credit for the purchase of second homes and curb speculative housing investments'. Although the statement on his ministry's website gave no further details, both the equity and property markets reacted negatively to the news. Shares of mainland property stocks continued to fall, with Longfor Properties slipping 1.5 per cent to HK$8.28 yesterday and Agile Property Holdings dropping 1.4 per cent to close at HK$11.14. Meanwhile, transactions in large mainland cities remain thin, according to property agents. 'Buying sentiment is bound to be hit if the tighter home lending is put in place,' said Dickson Wong Hung, a deputy general manager at Centaline (China) in Beijing. A recent report in Beijing Business Today predicted that the government would require buyers of second homes to make a minimum down payment of 50 per cent instead of the current 40 per cent. Wong expects property transactions to fall 30 per cent this month compared with December. Sales have also been affected by the cold weather. 'The market nearly came to a standstill over the past few days because of the heavy snowstorms in Beijing since Sunday,' he said. The decline in sales follows warnings from Premier Wen Jiabao last month that excessive property price rises in some cities could prompt the government to use land supply and financial and tax measures to regulate the market. Lee Wee Liat, a senior property analyst at Nomura International (Hong Kong), said the rule requiring 40 per cent down for the purchase of second homes was not strictly enforced by local governments. 'However, the central government is likely to be more serious about implementing the new rule to curb speculation,' he said. Cities such as Hangzhou might be hit hardest, as investment fever had sent prices soaring 50 per cent to 100 per cent last year, he said. Already, from January 1, the resale lock-up period for a property has returned to its original five years, having been reduced to two years under incentives introduced in 2008 to stimulate the market. It means owners must once again wait for five years before being able to resell a property if they wish to avoid paying a 5.5 per cent business tax. Also, it is widely expected that a nationwide property tax will be introduced, as reported in the media on Tuesday. Cooling measures Central government studying new rules to curb real estate prices Buyers of second homes may have to make down payments of at least: 50%
