House prices unlikely to dive

Potential homebuyers check out a property project in Beijing, Sept 8, 2016. [Photo/VCG]

The Bank of Beijing has raised its benchmark mortgage rate for first-time buyers by 10 percent from 4.9 percent to 5.39 percent, one of the first group of banks to raise the mortgage interest rate.

China Minsheng Bank also hiked the benchmark by 10 percent, starting Monday.

Early in May, major banks including Industrial and Commercial Bank of China, Bank of China, China Construction Banks and China CITIC Bank introduced a 4.9 percent benchmark mortgage rate and hiked the benchmark for second properties by 20 percent.

"The increasing mortgage rate has lowered the expectations of many first-time buyers. It means the cost of buying property will keep going up," said Guo Yi, marketing director of real estate consultancy Yahao.

Take a 1 million yuan ($147,200) loan for example. With the benchmark interest rate, buyers need to pay 5,788 yuan per month while after the interest rate rise, the monthly payment will increase to 6,075 yuan.

The capital's hitherto hot housing market has been feeling the chill due to a series of tightening regulations, and the increasing benchmark mortgage rate has further turned potential buyers off.

According to the Beijing Municipal Commission of Housing and Urban-Rural Development, May saw a dramatic 70 percent drop in secondhand property sales compared with April.

Real estate agency 5i5j said its online sales of secondhand property in Beijing had slipped by 39.3 percent, marking a new low since 2015.

Hu Jinghui, vice-president of 5i5j, said property purchases through commercial loan were the mainstream activity. But since banks have canceled the discount rate on the interest rate, many potential clients have suddenly disappeared.

"The real estate market is facing the strictest and tightest regulation ever. Many buyers have to give up or put off their plans," said Hu.