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China says it could tighten property controls

A man walks past a wall at a construction site at a new residential area in Beijing February 27, 2013. REUTERS/Kim Kyung-Hoon
A man walks past a wall at a construction site at a new residential area in Beijing February 27, 2013. REUTERS/Kim Kyung-Hoon

BEIJING (Reuters) - China could increase required downpayments and loan rates for buyers of second homes in cities where prices are rising too quickly, the State Council said on Friday in the central government's latest move to contain housing costs.

Local governments must set home price control targets in the first quarter, the central government said in a statement on its website, www.gov.cn

The State Council, China's cabinet, on February 20 restated its intention to extend a pilot property tax program to more cities and urged local authorities to put price-control targets on new homes, in an effort to calm real estate markets.

"Currently the property tightening campaign is at a critical stage, sentiment on rising home prices have strengthened," Friday's statement said.

In February, average home prices in China's 100 biggest cities rose for the ninth straight month although the pace of increase slowed, a private survey showed on Friday.

Rising home prices have reignited concerns about property inflation and analysts say local governments may announce plans to tighten property purchases after Beijing reiterated its pledge to calm the house market.

Currently, minimum downpayments for second homes are 60 percent of a home's value while mortgage rates for such purchases are 1.1 times the central bank's benchmark interest rates.

SPECULATION IS RIFE

Beijing has instructed banks to prioritize and assist first-time home buyers to help keep a lid on social discontent.

China's property market is rife with speculation about house prices and about what the country's new leadership may do to curb them once it takes office next week.

Economists at state-run think-tanks believe investors are right to be worried that the government is preparing to widen a pilot property tax as part of broader reform of land and fiscal policies.

Sun Xuegong, an economist with a think-tank under the powerful National Development and Reform Commission, told Reuters this week that China urgently needs a blueprint to stabilize the real estate market. He said that Xi Jinping and Li Keqiang, set to take over as president and premier, respectively, at China's annual parliamentary meeting from March 5, would not shy from delivering one.

Hui Jianqiang, the research head at E-House China, a real estate information provider in Shanghai, said Friday's State Council statement is more detailed than the sketchy guideline issued on February 20 "but it is still difficult for now to quantify the effect of the policy."

(Reporting by Xiaoyi Shao, Aileen Wang and Nick Edwards; Editing by Richard Borsuk)

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