Beijing will scrap some home- purchase incentives after property prices surged, reducing the scope of the housing sales-tax exemption and enforcing the 40 percent down payment requirement for second homes.

Homes sold after being owned for five years will be exempt from the tax, compared with two years previously, the Beijing Municipal Commission of Housing and Urban-Rural Development said in a statement posted on its Web site late yesterday.

The measures are aimed at curbing investment and speculative purchases and at balancing supply and demand, according to the statement.
China's property prices surged 9.5 percent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan ($204 billion), more than in the previous quarter combined.

The China Banking Regulatory Commission told banks last month to "strictly" follow property lending policies.

Beijing will also tighten rules on home purchases by foreigners, temporarily relaxed after the financial crisis. Non- Chinese resident for less than a year can't buy properties and qualified purchasers are limited to one home, the statement said.

The local government will also adopt administrative measures to help developers speed up construction and sales, the government agency said.

The capital added 9,640 new homes in the first month this year, 6.1 percent more than December, the commission said. In January, 8,698 home transactions were completed, 42 percent fewer than the previous month, according to the statement.

Eoin Treacy's view A great deal of commentary has focused on China's property market from the perspective of pointing out the problems that can be associated with excess capacity. However, the measures already taken to calm market sentiment such as higher bank reserve requirements and now curtailments on incentives also need to be taken into account.

The Chinese have demonstrated on a number of occasions that they are willing to act against overheating sectors that threaten to endanger the wider economy. They have taken aim at the property sector which should at least slow the market's advance and could potentially cause it to peak. If the past is any guide, they will continue to tighten conditions for the sector until they get the desired result. This pre-emptive action should help to avoid the worst effects of the burst bubbles seen in some OECD countries.