Potential risks
Along with providing the down payment loans, many new financial institutions are eager to introduce property-related financial products due to the growing market, Xue said, noting that the products pose a huge risk to financial institutions if housing prices decline dramatically.
The products could create some additional risk to the real estate market in the Yangtze River Delta, said Shaun Brodie, head of China strategy research at DTZ/Cushman & Wakefield.
"There might be cases where some buyers might overstretch themselves financially by taking on such products," Brodie told the Global Times on Thursday in an e-mail.
Clamping down
There are actually a number of reasons why prices have risen steeply recently in first-tier cities such as Shanghai, Brodie said. Those reasons include stable demand, low inventories, greater liquidity, lower interest rates, and investors moving money from the stock market to the real estate sector in first-tier cities like Shanghai.
There is also an element of "group think" on the part of buyers who worry that they need to get in on the market now because prices are about to rise, Brodie said.
Innovative financial products have definitely played a part in the recent price rise, "but when the overall picture is viewed, their contribution to rising prices has been smaller than the whole of the rest of the contributing factors," Brodie noted.
Some city governments have recently implemented policies to keep home prices under control.
On March 25, the Shanghai municipal government introduced new requirements on home purchasing, such as raising the minimum down payment for second-home buyers from 40 percent to 50 percent. Under the new rules, residents without Shanghai hukou also have a harder time buying property in the city.
Shenzhen announced similar measures later on the same day.
In Suzhou, East China's Jiangsu Province, the government banned homebuyers earlier this month from tapping credit cards for their down payments, according to a report of Suzhou Daily on April 2.
"It's good for the local governments to implement policies to control housing prices in order to prevent a dramatic rise or fall in prices," Xue said.
"Currently, the authorities can't fully prevent the risks that might be brought on by property-related financial products," he noted. "Increasing the down payment requirements is an effective way to prevent the potential risks."
It would also help if authorities strengthened supervision over new financial products, Xue said.
At a press briefing on March 12 on the sidelines of the annual National People's Congress, People's Bank of China Governor Zhou Xiaochuan said home buyers are not allowed to borrow money for home mortgage down payments, according to a report on the domestic news portal sina.com in March.
However, financial risks due to over-leveraged buyers in second- and third-tier cities in China are unlikely to occur because buyers in these cities don't need to borrow as much to make their down payments, Brodie said.
Meanwhile, prices in second- and third-tier cities have not risen as fast as in the first-tier cities, so home buyers don't feel such as an urgent need to buy property, he said.
