* Cabinet raises mortgage down payments for 2nd-home buyers
* Orders local governments to set price controls for 2011
* Vows to build affordable homes; no mention of property tax
(Adds details, background)
By Zhou Xin and Kevin Yao
BEIJING, Jan 26 China on Wednesday unveiled
fresh measures to curb property prices, including requiring
unruly local governments to set price controls, but made no
mention of a widely expected property tax.
City governments must set property price control targets in
line with local income levels for 2011 and need to make the
targets public in the first quarter, according to a state media
report citing a cabinet statement.
"Local governments must shoulder responsibility for the
stable and healthy development of the property market," the
radio report said.
China's municipal governments have a vested interest in the
booming property sector, which provides much of their tax
Banks would require a down payment of at least 60 percent
for second-home buyers, up from 50 percent currently, according
to the report.
Lenders will continue to charge "differentiated" interest
rates on mortgages. As for second home buyers, the rates should
be at least 110 percent of the benchmark rates.
Local residents would be barred from buying a new home if
they already own more than two houses.
While the statement did not mention the long-discussed
property tax, the government would step up tax collection in the
"These are unprecedentedly harsh policies, and will
definitely weigh down (property) prices," said Hua Zhongwei, an
analyst with Huachuang Securities in Beijing.
"I expect the property tax will be launched soon as well."
China property market limps into new year [ID:nL3E6NS0CD]
China property market digest [ID:nTOE701001]
FACTBOX-Key changes in China's property policy [ID:nTOE6BN05F]
Graphic on China's property inflation:
DIM OUTLOOK FOR DEVELOPERS
Concerns about further tightening, particularly the property
tax, have weighed heavily on the domestic stock market, which
has fallen about 15 percent over the past ten weeks.
Despite a slew of measures to target the property sector,
however, including higher down payments and mortgage rates,
property prices have stayed stubbornly high and property
companies have continued to thrive.
SOHO China (0410.HK), a large commercial developer, has seen
its shares go up 9.1 percent since the start of the year. Shares
of Vanke (000002.SZ), China's largest listed developer, are up
2.9 percent over the same period.
The rules announced Wednesday could be a different story.
"The new measures are very strict," said Shen Aiqing, a
property analyst with GF Securities in Guangzhou. "If property
sales plunge, some (smaller) property developers will definitely
run out of cash."
Banks, including China Construction Bank (0939.HK)
(601939.SS), Bank of China (3988.HK) and ICBC
(1398.HK)(601398.SS), could also see their profits squeezed as a
result of tighter lending.
The cabinet reaffirmed a pledge to build more affordable
homes to slake demand from low- and middle-income households.
The country's leaders, acutely aware of public anger over
unaffordable housing prices, have said they would not tolerate
property inflation and speculation.
China's annual property inflation eased to 6.4 percent in
December from November's 7.7 percent, though sequential momentum
has remained strong, with prices rising 0.3 percent on a
Chinese banks channelled 2.02 trillion yuan ($307 billion)
in new loans into the property sector in 2010, accounting for a
quarter of total new yuan loans, the central bank said on
(Additional reporting by Chris Buckley; Editing by Don
Durfee, Ron Askew, Ruth Pitchford)