China's overheated Shenzhen and Wuhan step up curbs on home purchases
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High rise residential flats are under construction in the southern city of Shenzhen neighboring Hong Kong, China September 11, 2015. REUTERS/Bobby Yip
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BEIJING (Reuters) - China's Shenzhen and Wuhan stepped up measures to rein in a red-hot housing market with fresh curbs on borrowings and purchasing of multiple homes, extending nationwide efforts by policymakers to cool prices and reduce the risk of a market crash.
The downpayment level for Shenzhen's second-home buyers who borrow from the housing provident fund will be raised to 70 percent from 30 percent, the Shenzhen Housing provident Fund Management center said in a notice on Tuesday.
For first-time buyers, the downpayment will be increased to 30 percent from 20 percent. Furthermore, loans will not be issued for third-home buyers, who only needed to put down 30 percent as downpayment under previous rules.
The housing provident fund is a kind of social insurance that allows Chinese employees to save money toward purchasing their own homes.
Shenzhen, China's tech hub bordering Hong Kong, has long been one of the high-growth home markets. Average home prices in the city rose 34.1 percent in September from a year earlier.
The Shenzhen local government has twice introduced restrictive measures this year, including raising the downpayment ratio for first-home buyers and second-home buyers seeking bank loans.
Wuhan, the capital of central Hubei province, also strengthened restrictive measures by requiring higher downpayment and banning third-home purchases, the Wuhan Housing Security and Management Bureau announced in a notice late on Monday.
The city's first-home buyers have to pay a 30 percent downpayment as a condition for borrowing from banks, compared with 25 percent under previous rules.
Residents who own two or more homes are not allowed to purchase more, while previously they were only banned from borrowing from banks.
Non-resident first-home buyers must also show proof of paying at least two consecutive years of social insurance or tax in the city.
The new rules in both cities are effective from Nov. 15.
Wuhan is one of China's most overheated cities with average new home prices in September rising 21.3 percent on year, official statistics showed.
More than 20 cities have adopted restrictive measures, including higher mortgage downpayments and an immediate ban on second-home purchases, to prevent speculative buying that could further fuel price bubbles.
However, some analysts noted that some cities were not as tough with their measures.
China's real estate investment growth quickened in October to its highest since April 2014, data showed on Monday, though a slowdown is expected in coming months as the curbs start to bite.
(Reporting by Yawen Chen and Nicholas Heath; Editing by Shri Navaratnam and Jacqueline Wong)
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