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March 31, 2015

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Home » Business » Real Estate

Lending eased to boost home sales

By Ye Zhen | March 31, 2015, Tuesday | Print Edition

CHINA yesterday loosened its mortgage policies in a bid to boost demand in the country’s housing market and spur economic growth.

Second-time buyers will have their minimum down payment cut to 40 percent from the previous 60-70 percent, the People’s Bank of China, the Ministry of Housing and Urban-Rural Development and the China Banking Regulatory Commission said in a joint statement yesterday.

The ratio for households who have paid off their mortgage and use provident funds to purchase a second home remains at 30 percent.

First-time buyers using housing provident funds will have to pay a minimum of 20 percent as a down payment, down from the previous 30 percent, the statement said.

“The move is aimed at improving housing credit policies, supporting residents’ demands to improve housing conditions and promoting the steady and healthy development of the property market,” said the statement on the central bank’s website.

The announcement rolls back a policy first introduced four years ago to try to cool the then red-hot property market as rocketing prices put homes out of the reach of many people.

The move comes as China’s growth falters, leading to widespread expectations that policy-makers will have to boost the economy through further monetary loosening.

China’s gross domestic product grew 7.4 percent last year, the slowest in nearly a quarter of a century.

“The easing is much stronger than market expectation, signaling a shift in China’s housing policy stance,” said Zhang Dawei, chief analyst at real estate agent Centaline Property. “The cut will directly boost demand and lift home prices.”

Le Jiadong, a property analyst at Guangfa Securities, told AFP: “The cut (in down payments) will strongly support the property market, especially in first and second-tier cities.

“Introducing this policy at this time fits the situation of the property market’s development,” he said.

In a separate statement yesterday, the Ministry of Finance said that it would ease taxation on home sales.

A home owned by a seller for at least two years will be exempt from business tax, the ministry said. The previous minimum was five years.

Last week, the Ministry of Land and Resources urged cities with a surplus of houses to reduce or even halt supplies of residential land and control the pace of construction.

Property investment is a key driver for China’s economy, while land sales are a major source of revenue for cash-strapped local governments, which have been feeling the pinch as growth has slowed in the world’s second-largest economy.

China’s property has been in a downturn amid surplus supply and sluggish demand, dragging down economic growth.

The average home price in 100monitored Chinese cities in February dropped 0.24 percent month on month and 3.84 percent year on year, according to the China Index Academy.

“The announcement, following the disappointing January and February macro activity data, is another step to stabilize the overall economy,” said Zhu Haibin, chief economist with JP Morgan.

However, some analysts said the easing measures would have a limited impact in reversing the market downturn.

Guan Qingyou, chief macro-economic researcher with Minsheng Securities Co, said the measures would boost the market in the short term but wouldn’t change the long-term downward tendency as properties were no longer an attractive investment.

JP Morgan expected growth of real estate investment to decelerate further from 10.5 percent in 2014 to 6 percent in 2015.

Meanwhile, China Central Television said yesterday that several banks in Shanghai were offering discounts on mortgage rates for first-time purchasers.

Eleven of 27 major banks in Shanghai, including the five largest Chinese lenders, are said to be offering a 5 percent discount on the benchmark mortgage rates for first-time home buyers, according to the CCTV report.

 

 

 

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