China on Friday unveiled a series of measures to tighten property lending in its latest attempt to cool the country's overheating real estate market and curb mortgage lending risks.
The central bank and China Banking Regulatory Commission said in a joint statement that it will ban banks from lending to developers found to have been hoarding land. The changes were expected to take immediate effect. Downpayment requirement for second homes were raised to 40% from 30%, and requirements for commercial properties such as offices and shopping malls were increased to 50% from 40%, the statement said.
Mortgage rates for such purchases must be no less than 1.1 times benchmark rates, it said.
"Recently, property prices had gone up quite fast, which is obviously irrational," the statement said. "Once prices tumble, bad loans at commercial banks would surge."
The statement said it would still encourage people to buy their first homes. Downpayments for buying homes smaller than 90 square metres will remain unchanged at 20%, while for larger homes, the rate will be kept at 30%.
It is the second time since last year that the government has guided commercial banks to raise the downpayment requirements for home purchases.
Since 2005, China has raised interest rates, imposed new taxes and restricted lending to cool the robust property market out of concern that a possible collapse might endanger China's financial system and hurt its economy.
However, increases in property prices have accelerated this year, fueled by excess liquidity brought about by the country's widening trade surplus and hot money inflow driven by China's yuan appreciation.
Property prices in 70 major cities jumped 8.2% in August from a year earlier, with prices going up 20.8% in the southern boomtown of Shenzhen and 12.1% in Beijing.
Share prices of Chinese listed developers such as China Vanke have lost ground in the past few days on domestic reports that the government would soon take steps to curb property speculation.
Sources familiar with the policy told Reuters earlier this month that such steps were imminent.
China Construction Bank, the country's top bank lender for home purchases, said on Thursday it was tightening loan requirements for buyers of second homes. Measures adopted by the state bank are largely in line with the official announcement on Friday.