Chinese cities further ease homebuying policies to spur sales

CHINA’S local governments are stepping up the easing of rules for their housing markets, as a protracted sales slump weighs on the economy and real estate developers.

A total of 15 cities have removed the lower limit for mortgage rates on first-home purchases as at Wednesday (Apr 10), the Economic Observer reported, citing its tally of announcements by local governments. The move, powered by the central bank’s relaxation of minimum mortgage rates last year, is designed to entice homebuyers as prices fall.

Four cities relaxed policies on housing provident fund loans, a cheaper bank loan that is mostly used to buy apartments. Beijing increased the loan quota by 400,000 yuan (S$76,228) and southern trading hub Guangzhou raised it by 200,000 yuan.

The moves did little to assure investors, with a Bloomberg Intelligence gauge of China property developer stocks falling 2 per cent on Thursday morning, extending this year’s decline to 28 per cent.

China’s residential sales slump dragged on last month, dashing hopes for a turnaround during the traditionally busy spring season. The downturn has worsened a liquidity crisis at builders including China Vanke and swelled bad loans at the largest state-owned banks.

“The fact that two tier-1 cities eased homebuying policies raises the prospect for further local relaxations ahead,” said Ding Zuyu, executive director of E-House China Enterprise Holdings. “After all, expectations for a property recovery fell short in the first quarter.” BLOOMBERG