CHINA is set to take further action, including relaxing home-purchase restrictions, as it scrambles to tackle a deepening crisis in its massive debt-riddled property sector, four people familiar with the matter said.

In the coming weeks, regulators – including the housing ministry, central bank and financial regulator – will implement measures they have been working on over the past few months under State Council guidance, two of the sources said.

They plan to act as existing policies have failed to sustain a sector rebound earlier this year, the sources added.

The property sector accounts for roughly a quarter of the world’s second-largest economy. However, it is in the throes of an unprecedented debt crisis that market participants fear could spread throughout the financial sector at home and beyond.

Proposed measures include lifting home-purchasing curbs in non-core districts of major cities such as Beijing, Shanghai and Shenzhen, said three of the sources, who declined to be identified as they were not authorised to speak with media.

Such curbs have been in place in many cities since 2010, and include restrictions on purchases by so-called unqualified non-residents, as well as on the number of properties individuals can buy.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

Many smaller locales have eased home-purchase curbs over the past two years to boost demand, but major cities – traditional targets of speculative buying – have held off.

Another proposed measure is to gradually remove price caps on new homes, widely in place for local governments to control home prices, two of the sources said. That would effectively allow property developers to raise or lower home prices.

The State Council Information Office, which handles media queries on behalf of the government, did not immediately respond to Reuters’ faxed request for comment. The Ministry of Housing and Urban-Rural Development, People’s Bank of China and National Administration of Financial Regulation did not immediately respond to requests for comment.

Support measures

Authorities hope the measures will bolster consumer demand over the next few months, the sources said, in a property sector that has been on a downward spiral since 2021, when the government took action to stop developers from accumulating debt.

The government has already announced a string of support measures for the sector in recent weeks, against a backdrop of investor-spooking data indicating lacklustre economic growth and sagging consumer confidence.

On Thursday (Aug 31), the central bank and financial regulator lowered mortgage rates for first-time homebuyers. They also reduced the downpayment ratio to no lower than 20 per cent for first-home buyers and no lower than 30 per cent for second-home purchases.

“We see this as a key step in Beijing’s reflation efforts… It is a positive surprise for the market given the fading hopes on easing since mid-August,” Morgan Stanley analysts said in a client note.

Last Friday, regulators relaxed criteria for first-home mortgages, saying they could be based on whether buyers owned homes at the time of application rather than on prior mortgage records.

This week, fifth-biggest city Guangzhou, tech hub Shenzhen and two other large cities said they would allow home buyers to enjoy preferential loans for first-home purchases regardless of credit records. REUTERS