[BEIJING] China on Wednesday said it will cut the minimum down payment level for first-time home buyers in many cities, stepping up support for the sluggish property market and stumbling economy.
The move is the second measure in two days to fire up Chinese consumption following the government's decision to halve the tax on the sale of small cars.
The central bank and banking regulator said they would be lowering minimum down payments for first-time home buyers to 25 per cent, from the previous 30 per cent, in cities that do not have restrictions in place for purchases.
The move is intended to "support reasonable consumption of housing", the People's Bank of China and the China Banking Regulatory Commission said in a statement posted on the central bank's website on Wednesday, but dated Sept 24.
China's property sector has hit a weak patch in the last year or so, with slowing sales leading to an overhang of unsold apartments and affecting demand for everything from steel to home appliances and furniture. "The relaxed rule is helpful but the impact will not be immediate because the main reason for high inventory in some cities is bad location and transportation," said David Ji, Greater China head of research and consultancy at Knight Frank. "The new rule will likely stimulate demand from buyers who are already observing on the sideline and help them to get into the market," Ji added.
The property sector accounts for 15 per cent of China's gross domestic product, so even modest signs of improvement would relieve some pressure on the economy, which is expected to expand at its slowest pace in a quarter of a century this year.
While home sales and prices have picked up in the last couple of months, annual growth in property investment in the first eight months of the year slowed to 3.5 per cent, the lowest since early 2009, while new construction starts plunged by nearly 17 per cent, impacting commodity markets worldwide.
Wednesday's move is the latest step aimed at supporting a sector seen as pivotal to economic growth. The government eased restrictions on foreigners purchasing property in August, though the impact of that step was seen as limited.
The lower down payment requirements will not apply in certain big cities such as Beijing, Shanghai and the southern boom town of Shenzhen that have imposed restrictions on property buying to stem the creation of bubbles.
The authorities said localities could adjust the minimum down payment requirement if they saw fit, in line with local market conditions.