The Shenzhen branch of Huaxia Bank raised its housing loans down payment proportion to 40 percent last week, as a pilot in response to the China Banking Regulatory Commission (CBRC)'s policy direction. The change is an omen of government sponsored austerity in housing loans.

Statistics show that property prices in China's 70 large and medium cities rose by 7.5 percent year-on-year in July. Shenzhen and Beijing were listed amid the top five in housing price growth rate, with year-on-year increases of 16.1 percent and 11.6 percent respectively.

According to earlier media reports, CBRC chairman Liu Mingkang said commercial banks are expected to raise the down payment ratio on housing loans to cool down the sizzling realty market.

Several other local banks are amending their personal housing loans policies.

A branch of Shenzhen Development Bank in eastern China disclosed that it has suspended individual housing mortgage loans for business purposes.

Meanwhile, one branch of China Merchants Bank lifted the down payment for second-hand house loans to 40 percent. Second-hand house loans have been ceased in Shenzhen branches of China Construction Bank and Bank of China.

At China Construction Bank's Beijing branch, if a client plans to purchase a second-hand house but the house's primary loan hasn't been paid off yet, the client's loan application will probably be declined.

According to CBRC, the ratio between loans and deposits reached 74.2 percent last year in Chinese shareholding banks, toeing the alarming line of 75 percent set forth by corresponding regulations.

In the first seven months this year, newly added loans amounted to 2.77 trillion yuan (US$364 billion), nearly 90 percent of last year's total.

On August 21, China's central bank raised the benchmark interest rates for the fourth time this year. The personal housing accumulation fund loan rate was raised 9 basis points to 4.59 percent for five years or less and to 5.04 percent for five years above, in a further effort to curb the housing loans.

(Chinadaily.com.cn August 23, 2007)