The People's Bank of China and the China Banking Regulatory Commission require mortgage holders who apply for another home loan to produce a down payment of at least 40 percent and pay a 10-percent premium on interest rates in a September 27 announcement. The requirements on third or fourth mortgages are stricter.

Families who have used bank lending or the public housing fund and applied for second or more home lending all have to face the tougher requirements with only one exception - if their first home's area per person is less than the average level in the region. "The restriction on second-home mortgage loans was to tackle the critical issue: by significantly increasing the cost of mortgage financing and by raising the barrier to access such easy credit," Liao said.

The Shanghai standard is less than 33.07 square meters, which can enable borrowers to enjoy discounts of up to 15 percent on the rates and 30 percent down payment as the policy for first mortgages.

"With the withdrawal of speculators and investors from the market, the resultant softening of property sales and prices, and also the impact of other new measures, potential buyers for self-use properties have adjusted downwards their projections on the outlook of property prices. This has encouraged many to take a wait-and-see approach towards buying a home in the expectation of a fall in property prices in the future," Liao said.

Property development lending has a loose relation with real estate investment in Shanghai due to the multi-financing channels of developers, the banking bureau said.

Property development investment rose to 64.33 billion yuan in the first half in Shanghai, up 3.8 percent than a year ago.

Of that, 40.74 billion yuan was for new residential projects, a year-on-year increase of 3.2 percent.

(Shanghai Daily July 28, 2008)