Beijing issues new policy aimed at curbing housing speculation, triggering public concerns

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Beijing has abruptly unveiled a new policy setting limit on loans from the housing provident fund for buying residential property, signaling the city's heightened efforts to combat housing speculation. But the move has also raised fears especially among young people about being disqualified to apply for mortgage loans.

China's housing provident fund is a pool to which employers and employees contribute every month in order to meet potential demand for mortgage loans to buy homes or rent apartments.

The new policy, which was announced by the Beijing Municipal Housing Provident Fund Management Center, puts a ceiling on the line of credit, setting the maximum loan that one can borrow from the housing provident fund at 1.2 million yuan.

The new policy even links the loan amount to the period a borrower has contributed to the housing provident fund. Applicants can take 100,000 yuan of loan from the housing provident fund if they have contributed to the pool for a year. So if they want to apply for a loan of 1.2 million yuan, they have to contribute to the fund for 12 years.

For a couple applying for mortgage loan from the housing provident fund, the loan amount will depend on the one contributing to the housing provident fund for a longer period, according to the new policy.

For second-home purchasers, the maximum loan amount that can be borrowed from the housing provident fund is lowered to 600,000 yuan from 800,000 yuan, according to the new policy.

The new policy also increases the down payment ratio for first-home buyers to 35 percent, while second-home purchasers are required to pay 60 percent up front.

The new policy comes as the Beijing government is following Chinese President Xi Jinping's call at last year's 19th National Congress of the Communist Party of China that "houses are used for living, not for speculation".

The policy is aimed at "putting a brake on investment-driven home purchases" and "leading citizens to make reasonable housing consumption", said the Beijing Municipal Housing Provident Fund Management Center in a statement.

The total deposits in China's housing provident fund grew 17.7 percent year-on-year to 12.5 trillion yuan by the end of 2017, according to a report released by the Ministry of Housing and Urban-Rural Development, the Ministry of Finance and the People's Bank of China.

Over the two years, the Beijing government has rolled out a series of housing policies to curb the skyrocketing home prices, among which the "joint property ownership" scheme is considered as a noticeable policy.

The scheme allows the government and home buyers to share the ownership of residential properties, which is helpful in stabilizing the real estate market and reducing the home-buying burden. So far, Beijing has launched several rounds of sales of "jointly owned homes" mainly located in the city's suburban areas.

Public concerns

However, the new policy seems to have triggered controversy among many Beijing residents.

"I will finish my post-graduate courses when I am 25 years old. And then, I will be qualified to apply for 1.2 million of mortgage loan [from the housing provident fund] when I reach 37, when I will be also encouraged [by the government] to have babies. Don't you think the policies are contradictory?" a user commented on Sina Weibo, China's popular Twitter-like social media platform, which is often used by Internet users to vent feelings about current affairs and regulations.

"The government takes people's money and does things that impede people from gaining happiness," wrote another Sina Weibo user.

And many Sina Weibo users complained about the Beijing government's indifference to the families with rigid demand for houses, saying that "the new policy will make the rich much richer, while the poor will bear more economic burdens."

Yang Xianling, a chief economist at the Ke Research Institute affiliated to real estate platform, said that the negative impact the new policy will have on the property market might beat the market expectations.

"The new policy would force many home buyers to borrow money from commercial banks, thus increasing the cost of residential property purchase. And some first-time home buyers might abandon the decision to buy houses because of the new policy," said Yang.

Among those who are affected by the new policy, young workers and families with inadequate economic strength would be more vulnerable from the loan limits set by the new policy. Some experts think that policymakers might use this policy to encourage young workers to rent houses as the country is stepping up efforts to develop the home rental market.

Since the new policy was announced on September 13, the trade volume in Beijing's real estate market has seen a sharp increase, according to media reports.

Many home buyers contacted the property agencies as soon as they heard of the new policy, urging them to complete the home buying process before September 17, when the new policy came into force, reported the Securities Daily.

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