Another ditch to cool housing market

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It’s not the last ditch, but the goverment (China bank regulation commision, or CBRC) is raising the down payment for 2nd or 3rd time home buyers. They will need to put down 40% or higher (compared to 30% in the past). Obvioulsy we can understand the good intention of the goverment policy: contain the speculation in the housing martket. More importantly, I believe this move is to help the banks control the risks in the home loans. After all, most banks in China are owned by the goverment; and housing loans made up a large percent of bank lending and bottom line (profit). Nobody wants to see a “US subprime style” crisis in China. But can the housing market really be regulated? Or can this new policy be implemented to all the stake holders’ satisfication?

(The following is some home listings at a broker near Zhongshan Park. Full size pic can be seen here).

Shanghai home listing pic

We know a lot good intention policies in the past either did not got implemented, or worked out exactly to the opposite. Some examples include: the “budget housing (smaller units)” which is intended for middle or low income family, actually got sold to investors (speculators). The raise of tax (trading, land) increased the cost of pre-owned homes and new homes, respectively.

While I don’t want to predict the housing market up or down (and give buying advice based on that), I think potential home buyers would better off do their own financial plan for “house”. Don’t just wait for some miracle or help from the goverment or the banks.

Appendix (the excerpt of new rules):


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