BEIJING (BLOOMBERG) - Banks in several Chinese cities have cut mortgage down payments for some homebuyers, 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 homebuyers to 20 per cent from 30 per cent, China News Service-backed Economic View and Cailian reported on Thursday evening (Feb 17).
Some banks in the southwestern metropolis of Chongqing and the southeastern city of Ganzhou also lowered the down payment ratio by the same amount, Shanghai Securities News reported on Friday, citing property agents.
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 homebuyers,” said Chen Wenjing, associate research director 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 authorities are making efforts to meet demand from first-time homebuyers, 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 program financed largely by central bank stimulus.
Heze is the home town of Peng Liyuan, President Xi Jinping’s wife and China’s first lady.
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 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.
Local media reported this month that the government has issued rules to make it easier for developers to tap cash from home presales, potentially easing the liquidity crunch engulfing the sector.
