Measures set out to cool down housing market (4)

13:17, July 11, 2011      

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Peng said he can only afford a monthly interest rate of around 2 or 3 percent.

"I am not the type of person who's willing to take huge risks. Therefore, I won't agree to take short-term loans with monthly interest higher than 3 percent, in case I fail to pay back the money in the agreed period," said Peng.

Conversely, China is trying to reduce the financial burden on individuals engaged in home purchases by offering low-price affordable housing. It is also a good way to dampen demand for commercial housing at high prices. That poses a potential threat to the country's financial stability because the banks have lent heavily to developers.

Since 2010, the central government has instigated new policies to curb soaring property prices, including instituting higher downpayment requirements and higher mortgage rates, in addition to suspending loans to buyers of third homes.

Last week, Premier Wen Jiabao urged that the building of affordable housing for the country's millions of low-income earners be launched and completed on schedule. The housing authorities announced on June 10 that the construction of 10 million State-subsidized apartments must start across-the-board by the end of November to meet this year's target.

The subsidized housing will cost an estimated 1.3 trillion yuan, with about 500 billion yuan provided by central and local governments and the rest coming from the private sector.

The authorities hope that the affordable-housing program will ease the impact of a slowdown in the residential property market as the government tries to restrict bank lending and avoid a real estate bubble.

"The launch of affordable housing will attract some lower-standard buyers but won't damage the whole real estate market in the way the restriction policies have," said Jia Wei, a sales manager at a property agency in Wenzhou.

Jia said that the restriction policies on residential properties have resulted in some of his clients moving to invest in industrial property, especially land used for building factories, as an alternative money spinner.

Unlike residential and commercial properties, there are policies to control the industrial property market, which takes at least three to five years to generate a profit of more than 50 percent from a single project.

"One of my former clients bought an industrial site of 70 mu (4.7 hectares) for 150 million yuan three years ago and sold it for 350 million yuan earlier this year," said Jia.

Jia added that investing in the industrial property market is easier for business people in Wenzhou because the majority of them own factories and they know how to identify a site in a potentially profitable location.

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