China in luxury homes crackdown

Those buying homes to sell on face a heavy tax

China is banning the building of luxury homes on new land to make affordable property available to poorer families.

The Ministry of Land and Resources is calling on local officials to provide room for "smaller and cheaper houses", state news agency Xinhua says.

And China's Central Bank will tighten scrutiny on lending to limit "excessive investment and loans growth".

The moves follow concerns that developers have edged the average resident out of China's property boom.

"The country cannot afford the construction of large villas to meet the demand of a few high-end customers while sacrificing the interests of the majority," said the vice-director of China's Land Ministry, Shu Kexin.

Economic fears

As well as poorer people being unable to afford homes, there is also resentment from farmers and other workers who are relocated to make room for the expensive developments.

This has led to protests - some which have turned violent.

The are also concerns that China's high level of growth, currently around 10% per year, needs reining in to stop the economy overheating.

Such expansion, especially in connection with spending on luxury homes and other developments, could burden China's banks with a mountain of bad debts, analysts fear.

More measures

Directives from Beijing to curb the growth of luxury houses are not new, but they have been widely ignored by local governments.

Part of the problem in enforcing the rules is caused by a lack of clarity over what is meant by a "luxury villa", Xinhua said.

From Thursday, measures come into force forcing home-buyers to increase downpayments from 20% to 30% and hiking taxes in the property market.

In a move aimed at developers and those buying properties to sell on, homes sold within five years will be hit with a 5.5% tax.