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Shanghai tries to pour cold water on hot housing market

Reporter: Hu Nan 丨 CCTV.com

11-30-2016 06:01 BJT

Shanghai residents woke up to tighter housing market rules Tuesday. The city's government has issued new market restrictions, in an attempt to cool the real estate market. Our reporter Hu Nan was there to hear directly from potential homebuyers, realtors and an industry analyst to find out what possible influence the restrictions might have on the market.

The new restrictions in Shanghai's housing market says the down payment for first-time home buyers should be at least 35% from the previous 30%. For second-time home buyers, the down payment remains at 50% for ordinary apartments and 70% for luxury units. It looks like a moderate policy. However, the definition of "second-time" home buyers makes the new restrictions the strictest-ever in China.

For the first time, Shanghai's housing market restrictions are expanding their scope. If you possess a real estate unit, or have a mortgage record anywhere in China, your housing purchase in Shanghai will be considered and classified as your second home. And, the minimum down payment may rise from 30% to 70% on this new, second home.

Why is the Shanghai government taking the condition of real estate markets in other cities into account?

"It implies that a national real estate network may have been established already, as well as a bank loan and mortgage database. So the investment capitals might be monitored now. In my opinion, other hot spot cities like Beijing and Shenzhen will follow the suit," Chen Jie, director of Real Estate Research Inst., of Shanghai Finance & Economic Univ., said.

It says Shanghai home buyers can enjoy the 35% down payment only if you have no real estate registered under your name, and have never gotten a housing loan in China. That actually rules out the great majority of Shanghai home buyers.

"About 90% of home buyers within the Middle Ring or the downtown area and over 60% within Outer Ring, or urban area, are former home owners buying bigger homes to improve their housing conditions. So the new restrictions will greatly depress the market," Lu Wenxi, analyst with Shanghai Centaline Property said.

Just like Mr. Zhang. He just sold his former apartment and was planning to use the money as down payment for a bigger home for his family and newborn baby. He was aiming for a 1 million US dollar apartment the day before the implementation of the restrictions.

"It's like a bolt from the blue. I got house loan for my first home, so now I have to prepare like a 700,000 dollars down payment for the apartment I was going to buy. That's impossible. I can't even afford to buy a place similar to my old home because housing prices have skyrocketed recently," Homebuyer Mr. Zhang said.

Rising prices, stricter lending criteria and purchasing restrictions have tempered growth for the short term, that's for sure. However, experts say the aim of these strictest-ever restrictions is to squeeze out investment-oriented capital to curb soaring prices, maintain market stability and boost the real economy.

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