By Chen Weihua (China Daily)
Updated: 2007-08-22 11:30

Rising housing prices and changing policies have brought both angst and excitement to homebuyers in Shanghai.

Many new buyers are talking to agents to revise contracts after the local government recently announced that first-time homebuyers can borrow up to 500,000 yuan from the city's housing fund from September 1.

The loan, which carries a relatively low interest rate, is currently capped at 300,000 yuan.

The new policy will be a relief for homebuyers that have to take out hefty commercial loans to finance purchases.

Many of the city's homebuyers jokingly refer to themselves as "mortgage slaves", because most of their salaries are used for loan repayments. But this situation is not going to change much for those who borrow  under 20- to 30-year terms.

Many homebuyers have been waiting for the last two years for prices to come down, after a number of policies were introduced to rein in the red-hot property market.

But as housing prices in Shanghai and most Chinese cities continue to rise, they could be waiting in vain. "And there is absolutely no sign that the prices will go down," said Li Zong, from a local real estate company.

"It actually costs more now to buy a small apartment in Pudong because the price has shot up from 15,000 yuan per square meter last year to 17,000 yuan," said Xiao Lu, a woman in her early 30s.

As housing prices continue to go through the roof, reports that some cities might raise the down-payment ratio from 30 percent to 40 or even 50 percent are causing many panics.

In fact, cities such as Shenzhen in Guangdong Province and Wenzhou in Zhejiang Province have already tightened up lending on home purchases.

But the Shanghai head office of the People's Bank of China has dismissed any increase in the down-payment ratio.

Unlike Wenzhou and Shenzhen, banks in Shanghai have shown no sign of cutting back on mortgages.

High land prices and the enthusiasm of local and overseas investors in Shanghai's real estate market have pushed the city's property prices, especially in the downtown area, to rise at a rapid pace in the last few months and many believe it's set to continue.