China has made another move to try and control property and land speculation.
It’s a sign that the government and regulators are getting more worried about the strains being caused by the rapid rise in property prices in some parts of the country.
The latest moves mark the second time this month that the government has acted to try and control the property surge.
Prices of commercial and residential property in China’s 70 largest cities rose by 10.7% in February from the same month in 2009.
That was up from the 9.5% year-on-year gain in January, according to China’s statistics bureau earlier this month.
Regulators have told banks to take more care when making real-estate loans and the country’s Banking Regulatory Commission has teamed up with land authorities to crack down on irregularities in land use.
Banks have been ordered not lend to developers found by state agencies to have held land without building houses.
They have also been told to be very careful in approving new lines of credit to 78 government-controlled companies whose core business isn’t property development, if they use collateral other than construction projects already in progress.
And, starting last Friday, personal loans of more than 300-thousand Yuan may not be given to the person borrowing the money.
Instead, the order from the Commission said the money must be transferred to the end recipient.
The move is to prevent lending flowing into the stock, or unintended sectors, such as property.
These moves represent a widening in the attack on the overheating property sector that have already seen banks forced to hold more capital against their assets, and tax laws tightened to force investors and others buying homes and villas to hold onto their purchases for five years to avoid tax.
The government has introduced policies since the start of the year to rein in soaring property prices, including reinstating a tax on sales within five years of purchase, increasing deposit requirements for second and third homes and launching a huge program to build subsidised housing across the country.
Earlier this month, the government published new rules on land sales for property developments, requiring higher down payments from developers.
Local governments have been told to set aside at least 70% of local land supply for construction of small residential units and state-subsidized housing.
Bloomberg quoted Liu Mingkang, head of the country’s Banking Regulatory Commission, as saying in Beijing on Friday, “We have to closely monitor China’s asset bubbles".
His group’s latest order is a direct message to Chinese banks to closely examine all property development proposals to make sure development groups are not pledging the same land for multiple loans.
“We ask banks to check the qualifications of the developers and they must have a face-to-face check,” Bloomberg quoted Mr Liu as saying.
That sounds like there has been a serious relaxation of lending standards, which always happens in asset booms and bubbles.
The latest moves represent a defacto state control of most lending above 300,000 Yuan.
Credit card lending is also now controlled to prevent loans being diverted into property and the sharemarket.
