ASIA BRIEFING: THERE HAVE been regular, uncanny parallels between the situation in the property market in China and that in Ireland of just a few short years ago – prices getting toppy, a market awash with cheap capital, lots of cranes on the skyline and a population eager to become home owners.

The difference is in how the government has approached dealing with an impending bubble, while at the same time trying to avoid a massive downturn. Beijing is doing a very delicate balancing act – it wants to slow price growth while avoiding outright collapse.

Talk of a bubble has not gone away but, at the same time, China’s 18 per cent first-quarter drop in home sales contributed to the slowest economic growth in almost three years.

The Chinese Communist Party does not have quite the same level of political pressure to deal with – it doesn’t have to worry about getting elected every four years.

It does worry though about losing support among the rising middle class, as questions about the government’s overall mandate are destabilising.

So, too, is inflation, which is partially at least fuelled by real estate price hikes.

What the government wants to do is to reduce borrowing costs for first-time homeowners, or would-be housebuyers, to encourage purchases.

At the same time, premier Wen Jiabao is keeping in place restrictions to stem the speculators who have helped drive home prices up by as much as 140 per cent since 1998.

Homebuyers in China are required to put down 30 per cent of the value of the first home and 50 per cent for a second property.

The benchmark rate for mortgages in China is the five- year lending rate set by the People’s Bank of China, currently running at about 7.05 per cent.

Bank of China, China Construction Bank and Agricultural Bank all offer as much as a 10 per cent discount to borrowers the banks deem as safest in Beijing, while smaller lenders such as China Merchants Bank and Bank of Beijing are charging the benchmark rate, according to Beijing’s second-largest real-estate agency, Bacic 5i5j Group.

Lower mortgage rates for those buying their first properties are an indication that the government may gradually ease its more stringent home-purchase restrictions in the second quarter.

At the same time, inflation fears linger. Authorities have refrained from cutting interest rates, even though the central bank increased interest rates three times last year.