BEIJING (BLOOMBERG) - China's central bank said it will allow banks to cut the minimum required mortgage down payment to 20 per cent from 25 per cent for first-home purchases to the lowest level ever as it steps up support for the property market.
The eased requirements will be for buyers in areas without the purchase restrictions that are applied in some of the biggest metropolitan areas such as Beijing and Shanghai, the People's Bank of China said Tuesday in a statement on its website.
The minimum down payment for second-home purchases was cut to 30 per cent from 40 per cent, the central bank said.
A rising stockpile of unsold new homes is hampering government efforts to spur investment expanding at the slowest pace in more than five years. China's politburo, the top decision-making body of the Communist Party, in early December vowed to reduce home inventory as one of its key tasks in 2016, the official Xinhua News Agency reported.
"This is clearly in line with the 'destocking' theme in the property market," Mr Zhou Hao, an analyst with Commerzbank AG in Singapore, wrote in a note to clients on Tuesday. "We believe that the relaxation of mortgage policy will somewhat help accelerate the destocking process in the lower-tier cities."
Reviving investment in real estate is crucial for the government, which has stepped up monetary easing with its sixth interest-rate cut since late 2014 and scrapped a ceiling on deposit rates. This is the central bank's second move to slash down payments since September, when it cut the minimum ratio for first-time buyers to 25 per cent from 30 per cent, a requirement that had been in place since 2010.
The move extends loosening in the property market since September 2014, as Premier Li Keqiang seeks to boost demand in China's growth expanding last year at the slowest pace in a quarter century. The down payment requirement for first homes was cut to the lowest in history. From 2003 to 2010, down payments were as low as 20 per cent for first-home buyers, before it was raised to 30 per cent as the market heated up.
The country's unsold homes continue to grow by area, surging 11.2 per cent to 452 million sq m at the end of 2015, the latest statistics bureau data show. The inventory is even bigger including homes which haven't been built, and are estimated to take 3½ years to be cleared, said Mr Zhu Jin, a Shanghai-based analyst at Orient Securities Co.