Shanghai's housing and land resources bureau recently put a stop to parallel remortgage. From now on, property owners must pay up their mortgage loan before they can transfer their property. This halt to remortgaging is bound to deal a heavy blow to property speculation that makes use of remortgage facilities offered by banks.

The new measure targets short-term speculators who usually borrow from banks after paying a small downpayment and then pass on the loan to new buyers through remortgage. Under the new measure, such speculators can no longer pass on their mortgage loan directly to new buyers. They must pay up their loan before new transaction can be completed. Higher cash flow demand will greatly increase the cost of speculation and prolong the cash turnover period. This could turn away most speculators.

Meanwhile, this move is likely to boost the leasing rate of low-to-medium priced secondhand property.

As a result of recent moves to regulate the market, investors are taking a wait-and-see attitude and thinking twice about buying secondhand property. To the contrary, the rental market is warming up and transaction is on the rise. The moves by banks to increase mortgage interest rate and stop granting loans to old public housing property have caused many prospective homebuyers to defer their purchase plans. However, many of these people badly need somewhere to live, and their demand has fueled a boom in the rental market, especially in the low-to-medium priced property market in districts such as Xuhui, Luwan and Huangpu where small units are in great demand.

Compared to the low-to-medium segment of the rental market, demand for top-end property for leasing remains flat.