A blog on Chinese economy & society

China raising rates for 2nd mortgage

with one comment

In its most recent drive to clamp down on speculation in the property market, the Chinese State Council has announced today that mortgages for all second houses will require at least 50% downpayment plus an effective 178bp increase in rates to about 6.5%. Given that rental yields in major cities like Shanghai is only about 3%, this raises the costs of speculators substantially. Downpayment for 1st mortgages on apartments larger than 900sf has also been raised to 30%. This obviously is a way for the Chinese government to tighten credit for its property market without hurting the general economy.

Will it work? Your guess is as good as mine, but the asset bubble does seem to have unnerved the government enough into some serious action. Besides raising mortgage rates, it is widely expected that property tax will be levied soon. So maybe there’s still hope that all is not too late.


Written by Cindy Luk

April 15, 2010 at 8:07 pm

Posted in China, Macro

Tagged with , , ,

One Response

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  1. […] a comment » This current round of tightening seems like the serious stuff. In addition to raising down payments and interest rates for 2nd homes announced earlier, the government is now banning mortgages to 3rd homes in key cities that are […]

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