China should expand the trial of a property tax to replace home-purchase curbs as the government continues to battle runaway property prices, the central bank said yesterday.

To meet the demand of end-users, different mortgage policies should be implemented, the People's Bank of China said in a report released on its website.

The PBOC proposed that a 30 percent down payment and comparatively low fixed interest rate should be adopted for first-time homebuyers, while those who are upgrading their homes should put a down payment of between 40 and 50 percent and be charged an "appropriate" fixed interest rate.

The central bank reiterated that investors should not get any credit support.

It also pointed out that while the home-purchase curbs have proved to be quite effective in reining in speculative demand, the policy may have created negative co-effects.

The PBOC suggested some genuine demand from end-users could have been stifled by the curbs which may lead to a significant rebound in pent-up demand in the future, unleashing a surge in property prices.

If the home-purchase restrictions are enforced for too long, home prices in China may drop abruptly, which will be devastating to the economy, the PBOC said.

Albert Lau, managing director of Savills China, said: "Austerity measures such as home-purchase curbs shouldn't be applied for too long as they may hurt the long-term development of the industry."

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