The central bank on Friday tightened lending and raised the mortgage down payment for second-home buyers in the latest move to curb surging property prices.
The People's Bank of China, the central bank, and the China Banking Regulatory Commission released new rules that lift the mortgage down payment for second homes to 40 percent from 30 percent. The mortgage rate for second homes has been set at 1.1 times the benchmark rate.
The new rules set the rates higher for buyers wanting to purchase more than one home.
Mortgage down payments for commercial properties such as offices and shopping malls were increased to 50 percent from 40 percent and the rules stipulate that banks must not lend money to developers that stockpile land. The rules are expected to take effect immediately.
The move is the latest bid to slow down rising property prices and ease mortgage lending risks after previous measures - such as interest rate hikes and tightening loans - failed to work.
Property prices in 70 major cities rose by 8.2 percent year-on-year in August after increasing 7.5 percent in July, according to the National Development and Reform Commission.
Housing prices in some cities registered higher growth rates. Prices rose by 13.5 percent from a year earlier in Beijing while Shenzhen prices increased 17.6 percent in August.
"When prices tumble, bad loans at commercial banks will surge," the central bank said in a statement, in which it described recent property price rises as "irrational".
"The new measures will certainly work to curb speculation, but I'm not sure to what extent," said Liu Xiahui, an economist with the Chinese Academy of Social Sciences.
He expects the new rules will be enforced as commercial banks, including top home loan provider China Construction Bank, are "aware of the risks".
By 2004, the bad loan ratio for mortgages at the Big Four commercial banks was 1.5 percent, but the overall bad loan ratio for mortgages has now reached 2 percent, according to Zhong Wei, an economist at Beijing Normal University.
Yi Xianrong, another economist at the Chinese Academy of Social Sciences, said banks and speculators could find ways to get around the rules.
Policy details must be clarified to eliminate loopholes, Yi said.
Tightening lending and increasing mortgage down payments alone is not enough to stabilize the market, Liu said.
The State must provide more low-cost housing to meet demand, and land supply should also be increased to ease price rise momentum, he said.