While domestic house buyers are expected to take a wait-and-see attitude after the recent rise in central bank interest rates, industry experts foresee little change in house prices.

Starting Sunday, the one-year loan rate and the one-year deposit rate have been both increased by 0.27 basis points to 6.39 percent and 2.79 percent, the People's Bank of China said on Saturday.

At the same time, the public housing fund (PHF) mortgage rates for individual house buyers were raised by 0.18 basis points. According to the Website of the Ministry of Construction, the annual interest rate for PHF loans with a maturity of five years or less has risen to 4.32 percent. PHF mortgage loans with a maturity of more than five years has been set at an annual interest rate of 4.77 percent.

"Obviously, house buying costs have risen and that could help curb domestic demand for new apartments in some degree," Zhai Baohui, an official with the policy research center at the Ministry of Construction, told the property channel on Sina.com.

"However, it will take time to get a clear picture about its exact impact on the country's real estate market."

Zhai said the situation could vary for individual home buyers.

"For capital affluent high-end apartment buyers, influence could almost be neglected as the 0.27 basis points' rate increase was rather small," Zhai said. "At the same time, demand by common wage earners, which account for the majority of the country's apartment buyers, will likely decrease as some of them might choose to postpone their apartment purchase due to the cost increase."

Industry analysts see the recent rate increase as just another move aimed at curbing the country's over-heated property market, which has seen prices almost triple since 1998. That's when China started nationwide urban housing reform.

Cong Cheng, an official with the local public housing fund management center, shared some of Zhai's views and said he believed the recent interest rate increase would have more of a psychological impact on people's buying sentiment.

"Increases in both the benchmark loan rates and PHF mortgage rates will have polarized effects over potential apartment buyers," Cong said during a phone interview yesterday. "People who can afford new apartments but are currently waiting are prone to feel pressured. Some of them, anticipating further increases by the central bank, might accelerate their pace to seal a deal.
"But for others, especially those who have a rather tight budget, it is also very likely that they might have to drop their plans."

Some industry experts emphasized that though the recent increase in interest rates were small, it could have had great impact on people's buying sentiment if the central bank continues to take such action in the near future. That's because for most home buyers, interest rates account for a significant part of the total cost of an apartment.

As for its possible influence over house prices, industry people said that very limited impact could be expected.

"Generally speaking, housing prices won't be affected much by this interest rate increase as we all know that the price is basically decided by the market demand," said an industry analyst with a local real estate agency, who declined to be identified.

Meanwhile, Pan Shiyi, president of SOHO China Ltd, one of the country's major developers, also expressed a similar opinion.

"Such an increase in interest rates will only have very small influence over housing prices," Pan was quoted as saying by Sina.com. "Not many potential apartment buyers will be deterred by such a small increase."

However, responses from local residents seemed rather mixed.

"My boyfriend and I have been looking for a new apartment over the past several months and probably won't change our mind even if the loan rates have been raised," said Vivian Yang, a 28-year-old marketing manager. "We plan to get married next year and just like many other young couples, we want to have a new apartment of our own to start our new life."

But Tony Yu, who graduated two years ago from a local university, said he thought current housing prices in Shanghai are still quite high.

"I hope the recent loan rate increase will have a positive effect on the overheated real estate market. If so, more people will be able to realize their dreams of having an apartment of their own."