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Chinese Government Still Intent On Curbing Property Speculation

News Posted On: 13 July 2012

In spite of a recent interest rate cut aimed at stimulating economic growth, the Chinese government is holding firm on its property market curbs.

Premier Wen Jiabao recently ordered local officials to enforce rules aimed at cooling house prices, and during a recent inspection tour of the eastern city of Changzhou is quoted as saying that people who try to evade the curbs should be punished. He is also keen to see more affordable housing become available, and wants local authorities to facilitate approval of land, and to improve the quality of construction by inviting more investors to participate in such developments.

The central bank in China recently cut the interest rate on one-year loans by 0.31 percentage points to 6%, and is also allowing banks to offer discounts to borrowers of up to 30% below this benchmark. This is an increase on the 20% discount previously allowed.

This latest interest rate cut was the second in a month as the government is trying to stimulate economic growth, but it's also keen to continue to control housing prices. At the same time the interest rate was announced, the government called on banks to control mortgage lending as they are still worried about an increase in property speculation.

The high cost of housing in China has led to political tensions, and the recent steep rises have been fuelled in part by government stimulus spending and bank lending after the 2008 financial crisis. Although government controls have helped push prices down slightly, they are still at near record levels. Prices declined for nine months, but this ended in June when the average house price in 100 major cities increased by 0.05% compared to a month earlier.

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