Reuters: Financial Services and Real Estate: China's Yangzhou city to subsidise some home buys

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China's Yangzhou city to subsidise some home buys May 8th 2012, 11:08 BEIJING | Tue May 8, 2012 7:08am EDT BEIJING May 8 (Reuters) - China's eastern city of Yangzhou announced on Tuesday it would subsidise purchases of fully furnished homes, a move that appears to contravene Beijing's two-year campaign to curb speculation and rein in housing inflation. Attempts to bypass property curbs in China's third-tier city of Wuhu and the financial hub of Shanghai this year were swiftly blocked by central authorities, underlining Premier Wen Jiabao's bid to push home prices back to what he describes as "reasonable levels". However, Beijing has spared cities such as Shenyang and Guangzhou that have made it easier for first-time home buyers to borrow from local housing provident funds which offer much lower mortgage rates than banks. The central bank has also ordered lenders to support first-time home purchases this year. The housing bureau in Yangzhou, in prosperous Jiangsu province, said in a statement on its website that it would offer cash subsidies of up to 0.6 percent of total purchase prices to encourage families to buy ready-for-use homes, which are typically more expensive than unfurnished homes. "From the previous endings of some local governments' efforts to salvage the housing market, it's clear that the central government will only tolerate policy easing that involves first-time home purchase," said Liu Yuan, head of research at property consultancy Centaline. "Yangzhou's policy does not only cover first-time home purchase, we still need to wait and see if it can be implemented eventually," he said. Analysts said many local governments had strong incentives to ease property tightening measures as they were suffering a slump in land sale revenues, a key source of funding and a lifeline for local-government-led investment. China's property market accounted for about 13 percent of gross domestic product in 2011 and the industry affects more than 40 other business sectors, making it pivotal to domestic economic activity. The real estate market is a key downside risk to the world's second-largest economy, which economists predict will grow at 8.4 percent in 2012, its slowest pace in a decade. The Yangzhou housing bureau said its new measure would be effective for one year from July 1. The move is part of Yangzhou's efforts to increase the proportion of ready-for-use new homes, which the city government said could save construction materials, reduce pollution and be more conducive to adopting new technologies and equipment, the housing bureau said. (Reporting by Langi Chiang and Nick Edwards; Editing by Robert Birsel) Link this Share this Digg this Email Reprints

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