The cities of Shenzhen and Guangzhou have joined the ranks of major Chinese cities that have lowered mortgage rates to lure homebuyers, close on the heels of the central government’s unveiling of historic stimulus policies this month.
Guangzhou, the capital of China’s southern Guangdong province, reduced the minimum down payment ratio to 15 per cent for first-time homebuyers and 25 per cent for second-time buyers, according to a statement issued by a local branch of the People’s Bank of China on Tuesday. Requirements that limited the floor for mortgage rates were removed.
The city’s authorities also eased restrictions for home purchases, such as rules for social security or individual tax payment records requirements, a separate statement issued late Tuesday showed.
These measures come into effect on Wednesday.
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At the same time, China’s tech hub Shenzhen reduced down payment requirements by 10 percentage points to a minimum of 20 per cent for first-time buyers and 30 per cent for second-home purchasers. It also reduced the lower range of mortgage rates based on the tenor of benchmark loan prime rates.
So far, three of China’s four tier-one cities have launched historic stimulus measures to revive the housing market, since the country’s top authorities issued an ambitious rescue package earlier this month, which included a 300 billion yuan (US$41.4 billion) relending facility.
About 10 provincial cities including Nanjing and Chengdu, have recently adjusted their property policies, with measures such as lowering the down payment ratio and subsidies on trade-in homes.
China’s eastern metropolis of Shanghai, became the first mover among tier-one cities, announcing relaxations on mortgage rates and down payment requirements for homebuyers on Monday. Each household opting for the trade-in scheme will receive subsidies of up to 30,000 yuan.
“We think the city of Beijing – the only tier-one city that has not moved, is likely to implement policies to support the property market in the near future,” said Raymond Cheng, managing director of CGS International Securities HK.
“Policymakers are determined to rescue the property sector and local governments are more cooperative this time around, as they could be held accountable for any further deterioration of their property markets.
“The latest measures should help to restore homebuyers’ confidence and improve developers’ sales in the future.”
Still, caution prevails as it remains to be seen whether the supportive measures will boost the floundering market. Buyers remain jittery about unfinished pre-sold projects and losses caused by falling market valuations. For the first four months this year, sales by the top 100 developers dropped 44.9 per cent year on the year to 312.2 billion yuan, according to data from China Real Estate Information Corporation.
