China’s top cities ease housing rules as Beijing extends aid
Officials are trying to revive homebuyer confidence, which has been crushed by falling prices, unfinished apartments and job insecurity
CHINA’S biggest cities including Shanghai, Shenzhen and Guangzhou eased requirements for home downpayments and mortgages, following through on the central government’s aid for the embattled property sector.
Shanghai and Shenzhen reduced downpayment requirements by 10 percentage points to a minimum of 20 per cent for first-time buyers and 30 per cent for second-home purchasers, according to two separate statements on Monday and Tuesday (May 28). The floor for mortgage rates was also lowered.
The southern city of Guangzhou said it will cut the required down payment for first-time homebuyers to as little as 15 per cent of the price, according to a statement from the local branch of the People’s Bank of China on Tuesday. The city will also relax the rules for social security or individual tax payment records required for home purchases.
The easing follows China’s most forceful rescue package earlier this month, when the central bank unleashed US$41 billion of funding to help local governments buy unsold homes. Officials are trying to revive homebuyer confidence, which has been crushed by falling prices, unfinished apartments and job insecurity.
Analysts including John Lam at UBS Group and Stephen Cheung at Morgan Stanley expect other top-tier cities to follow Shanghai’s lead, improving the outlook for market sentiment and sales.
A Bloomberg gauge of Chinese developer shares rose as much as 2.4 per cent on Tuesday before erasing gains. Shimao Group Holdings, which operates in big cities including Shanghai, jumped as much as 16 per cent in Hong Kong.
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The central government recently allowed local authorities to reduce minimum downpayments and make their own decisions for mortgage rates.
Shanghai’s latest easing comes after the city in September reduced downpayments and eased the threshold for some types of housing to be qualified for lower mortgages. Since then, it had only announced a marginal loosening in January to allow some non-local residents to purchase one property in the outskirts.
Shenzhen, a city of about 18 million people near Hong Kong and home to Tencent Holdings, made the move after the ruling Communist Party vowed in late April to study measures to tackle excess housing inventory that’s exacerbating the property slump. The relaxation is an escalation of the city’s incremental step to lower home buying thresholds in early May.
It remains to be seen whether the loosening will bolster sentiment among homebuyers, who remain wary of falling values and the risk that builders won’t be able to finish properties. Home sales at major developers dropped about 45 per cent in April. BLOOMBERG
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