By Hu Yuanyuan (China Daily)
Updated: 2007-10-18 07:40

Yang Ping, a 30-year-old business reporter, hasn't slept well since September 27, when the central bank raised the down payment for mortgages to 40 percent for second apartments.

It also lifted the interest rate on mortgages for second-apartment buyers to 1.1 times the benchmark one-year lending rate.

"I will go bankrupt," said Yang.

"I need at least another 180,500 yuan for the bigger down payment," she said. "And my mortgage payment is an extra 780 yuan a month."

Before the new policy was announced, it was a different story. Yang's new apartment jumped in value from 11,000 yuan per sq m in mid-June to over 15,000 yuan per sq m now.

A reporter mainly covering the property sector, Yang believes Beijing's real estate market still has large growth potential compared with international cities like Hong Kong.

When New Jiangnan Construction, a block close to the capital's CBD, went on sale, Yang decided to snap up an apartment, even though she had only 180,000 yuan to spare - barely enough for the 20 percent deposit.

"I was lucky to even get the apartment," said Yang, adding that she was vying with over 6,000 people for the 350 units on offer. "I didn't even have time to discuss it with my husband because he was on a business trip."

Yang said she bought the property partly for investment purposes and also for her own needs. She previously bought a 110-sq-m apartment outside the Fifth North Ring Road.

"It usually takes me three hours in traffic (to get to work), so I wanted to buy another place in the CBD," she said.

Despite the financial pressure, Yang is loathe to selling her new apartment. "I believe Beijing's property prices will go up further."

Zhu Qian, a 39-year-old executive, is in a similar situation. But as head of the HR department of a listed company, she is less likely to feel the pinch.

"If the down payment is really raised to 40 or 50 percent, I will pull some money from the capital market," Zhu told China Daily.

Although costs are rising, Zhu said she would still prefer to invest in real estate rather than shares.

"The risks of property investment are still lower than capital market risks," she said, adding that she may buy a third apartment if the opportunity presents itself.

At the 17th National Congress of the Communist Party of China (CPC), Guo Shuqing, president of China Construction Bank (CCB), told reporters that second-apartment status will be based on family rather than individual ownership.

However, Zhu Qian said staff at a CCB branch told her by telephone on Friday that her mortgage will still be treated as a first apartment since it will be the first in her name - even though her husband already owns two apartments.

"If the banks, especially branches and sub-branches, still want to provide individual mortgages, the new policy will be difficult to implement," said Wang Yongxin, associate director of the investment department of DTZ, an international real estate services firm.

But some banks have taken a cautious approach to home loans since the US subprime crisis hit.

"Mortgage down payments currently range from 20 to 30 percent for the first apartment. But in real terms they are 10 percent or even zero given the inflated prices," said Li Ling, general manager of the examination and approval department at the Shenzhen Development Bank (Beijing branch).

Total non-performing mortgages at the three major commercial banks - CCB, the Industrial and Commercial Bank of China and Bank of China - rose to 19.2 billion yuan at the end of 2006 from 18.4 billion yuan in 2005, according to a CCB report.

"Increasing down payments is a must," Li said.