Chinese mega cities relax mortgage rules to shore up housing
TWO of China’s biggest cities lowered mortgage requirements for some homebuyers following central government guidance, fanning expectations that more will follow suit to arrest a record housing slowdown.
Shenzhen, China’s least affordable city for housing, and the southern metropolis of Guangzhou issued notices on Wednesday (Aug 30) that they no longer disqualify people who’ve ever had a mortgage – even if fully repaid – from being considered as first-time homebuyers. That would make them eligible for smaller downpayment thresholds and lower mortgage rates.
The moves came days after the central government granted leeway for local officials to execute such policies, in a bid to revive demand from homebuyers that has been shattered by the two-year property crisis. The easing spurs hopes that Beijing and Shanghai, China’s two most important cities, may follow suit and dial down a policy-tightening cycle.
China’s real estate sector is now unravelling, with Country Garden Holdings posting a record loss and risks spreading to the country’s US$60 trillion financial system. So far officials have refrained from resorting to a large-scale bailout for the industry, spurring concerns about the economy and putting the government’s 5 per cent growth target at risk.
“Easing by the two major cities on the same day helps stabilise market sentiment,” said Yang Hongxia, general manager for southern China business at China Index Holdings. “It’s possible for Beijing and Shanghai to follow them.”
That said, scepticism remains. The South China Morning Post reported that Shanghai is unlikely to take drastic action, fearing rampant fund flows into its housing market.
While the policy loosening may release pent-up demand in higher-tier cities, any sales rebound is unlikely to be sustained without a fundamental turnaround in buyers’ sentiment, Fitch Ratings analysts wrote in a note. BLOOMBERG
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