(Yicai Global) Sept. 22 -- The People’s Bank of China is encouraging municipalities to allow the sale of second-hand houses that still have a mortgage attached to them, in a shift of policy aimed at boosting the turnaround of properties in the pre-owned home market. The central bank’s branch in southern Guangzhou province is spearheading the new measure.

The PBOC’s Guangzhou branch has contacted institutions and banks within its jurisdiction expressing support for such a scheme, Yicai Global learnt from people with knowledge of the matter yesterday.

By allowing pre-owned homes with existing loans to be sold, it will greatly shorten the turnaround period, lower transaction costs and improve convenience, all of which will encourage sales in the secondhand housing market, according to a document released by PBOC’s Guangzhou arm.

Previously, properties could not be traded until the mortgage was paid off. Under the new policy, title deeds can exchanged after transferring the mortgage, household registration and other mortgage-related procedures to the buyers.

“The measures introduced in Guangzhou are a new way of selling pre-owned homes and will have a positive influence,” said Li Yujia, chief researcher at the housing policy research center of the Guangdong Urban & Rural Planning and Design Institute. They will help save costs for the parties involved, shorten the turnover time and boost sales of used properties.

The new policy is quite innovative and an important strategy to increase transactions in the real estate market, Yan Yuejin, research director at think tank E-House China Research and Development Institute, told Yicai Global. It will simplify the sale of used homes and accelerate the circulation of properties.

However, it is crucial that all funds involved are handled by a notary trusted by all parties and that this notary ensures the rights and interests of both the seller and buyer as well as the creditor, Li said.

Most banks in Guangzhou, though, have yet to implement the new measures and are still studying the plan, Yicai Global learned when contacting numerous lenders. Only a few, such as the Guangzhou branch of Ping An Bank are implementing the scheme.

The scheme has already been piloted in other cities such as Nanjing and Suzhou in eastern Jiangsu province, Jinan in eastern Shandong province and Kunming in southwestern Yunnan province, Yan said.

Editors: Tang Shihua, Kim Taylor