Limit Availability of Mortgage Loan
Most people buying properties in China take out a bank mortgage loan to ﬁnance their purchase. Indeed, much of the property market bubble is blown big by easy access to ﬁnancing.
The new policy provides:
(1) only those families that don’t have any local home and don’t have any mortgage loan records can now buy their ﬁrst home (ordinary or luxury) with up to 70% mortgage loan;
(2) families that have no local property but have record of mortgage loan (referring to one of the family members having bought properties with bank loan in the past but having sold the property) shall now pay a down payment at least 50% of the ordinary property price and at least 60% of luxury property price;
(3) in case that the family have already one home in Shenzhen, then they shall pay a down payment of at least 70% of the ordinary property price and at least 80% of luxury property price.
This has made it very hard for people to ﬁnance their purchase of local properties unless they have a big amount of cash.
Ordinary properties carry with them less taxes and greater portion of mortgage loan as indicated above.
Now Shenzhen government set the standard of ordinary properties as follows: the living
compound has a greater plot ratio than 1.0, and the size of the property is less than 144 sqm in regard of gross ﬂoor area, and the total value is less than RMB 7.5 million (a bit more than USD 1 million).
There are other points of lesser importance in the new policy.
These new measures surely send chill to local property market and the property prices will witness substantial drop soon.