CRI听力: Administrative Measures to Cool down Property Market Are Flawed

The newly enacted policy to increase down payments on second home purchases is having an immediate effect on the property market. But experts are challenging the new administrative decree by pointing out its flaws. Our reporter Tingting has more.

With skyrocketing property prices out of control, the Chinese government has enacted a decree that down payments on second home purchases should be 50 percent of a home's total value.

Many experts argue this "one size for all" policy misses the group it is intended for, namely home flippers seeking to make quick profits.

But these house flippers account for just a small proportion of all apartment buyers, most of whom are purchasing second homes for themselves and their families. Now the hopes of the latter are being dashed with the new increased down payment requirement.

Zhu Qing, Manager of a real estate agency in Beijing, gives us an example.

"One of our clients who had signed contract for a home purchase backed off, because he could not afford the astronomical down payment. This new decree really has dampened many people's desire to buy another home to improve their life."

Experts also say the loans related to second home purchases constitute the bulk of banks' lending business.

Associates at many banks say their hands are tied when it comes to issuing home loans.

"According to the new decree, you must pay 50 percent of total value for the second home purchase. As for any third home purchase, it is completely impossible that we provide loans."

As a result, banks suffer hugely due to the dramatic shrinking business on home loans.

Some experts who hold different views on the new policy think these new administrative meassures have failed to take the banking factor into account.

Xie Guozhong, a former World Bank economic analyst, believes that increasing savings interest rates may be a more appropriate countermeasure in the effort to put property prices under control, since it is likely to channel hot money in the property market back into banks.

In one of his recent personal blogs, the economist says as long as hot money continues to flow into the property market, a bubble will remain and problems in the property market will persist.

Xie also says more rational investment channels for investors must be created so they all don't flood the property market.

The fact that new projects scheduled to market in May in Beijing are hitting another record high, averaging 28,000 yuan a square meter, simply shows that these measures have so far had little impact as intended.

For CRI, I'm Tingting.