Banks in Chinese cities cut mortgage down payments

BEIJING • Banks in several Chinese cities have cut mortgage down payments for some home buyers, in a move that may boost flagging housing demand, local media reported.

In Heze, a city of 8.8 million in Shandong province which was first reported to make the change, Bank of China, Agricultural Bank of China, Industrial & Commercial Bank of China and China Construction Bank lowered the down payment ratio for first-time home buyers to 20 per cent from 30 per cent, China News Service-backed Economic View and Shanghai-based Cailian reported on Thursday evening.

Some banks in the south-western metropolis of Chongqing and the south-eastern city of Ganzhou also lowered the down payment ratio by the same amount, Shanghai Securities News reported yesterday, citing property agents.

The Chinese authorities have been racing to arrest a worsening slowdown in the property sector that is hurting growth in the world's second largest economy. Home sales have been falling since July, exacerbating a cash crunch among developers.

"A change in the down payment threshold will have a big impact on home buyers," said associate research director Chen Wenjing at China Index Holdings. "More smaller cities may follow suit, especially tier-3 and tier-4 ones that are seeing a heavy slowdown."

The mortgage down payment cut in Heze has sent a signal to other municipalities that the authorities are making efforts to meet demand from first-time home buyers, Cailian cited industry analysts as saying. In the city, Agricultural Bank of China has also cut mortgage rates for first-time buyers to 5.6 per cent from 5.95 per cent at the end of last year, the report said.

Heze has been at the forefront of policy easing in the past. In 2018, it changed rules to make it easier for people to sell homes. The city also benefited from a redevelopment programme financed largely by central bank stimulus.

Heze is the home town of Madam Peng Liyuan, the wife of President Xi Jinping.

Home sales in Heze's urban area dropped 58 per cent in December compared with a March high, according to E-house China Research and Development Institute.

Measures taken recently by the Chinese authorities to address the nationwide property slump include boosting lending to developers and encouraging state entities to take over distressed assets of indebted borrowers.

The local media reported this month that the government has issued rules to make it easier for developers to tap cash from home pre-sales, potentially easing the liquidity crunch engulfing the sector.

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