More mainland Chinese cities are taking steps to shore up the property market as local governments and lenders eased the requirements on down payments and mortgage financing to arrest the worst slump in home sales in a decade. In Heze in Shandong province, four major banks have lowered the minimum deposit for home purchases to 20% from 30%. Buyers in Beihai in Guangxi have been able to borrow 60% of the cost to fund their second homes, up from 40% in January. “It signals that policy easing in the property sector may have entered a new phase,” said Zhang Zhiwei, Chief Economist at Pinpoint Asset Management in Hong Kong. “I would expect more cities to follow Heze to cut the down the payment ratio.” China’s USD1.7 trillion housing market has shown widening cracks lately.
Sales, measured by contracted volume at the nation’s 100 biggest developers, shrank 41% in January from last year to CNY526.6 billion, according to the China Real Estate Information Corporation. Lived-in home sales in Shenzhen, the wealthiest city in Guangdong province, shrank in 2021 to a 15-year low, according to the Shenzhen Real Estate Intermediary Association. Guangzhou recorded only 7,000 sales in January, a 56% drop from a year earlier, according to property intelligence provider CRIC China. “The local governments likely face mounting pressure to stabilize the property market,” said Zhang, citing a 72% drop in land-sale proceeds in January. “This is important as land sales accounted for around 43% of local government revenue in 2021.”
The local government in Nanning in Guangxi province said on January 15 that buyers can access CNY700,000 of provident fund loans for their first home and CNY600,000 for their second unit. Both represent a CNY100,000 increase from previous limits. “The relaxation measures are a strong signal that the government would like to repair the damage to the sector and restore market confidence,” said Pan Hao, Senior Analyst at the Beike Real Estate Research Institute in Beijing. Lenders have cut loan rates for both first time and second time home buyers in Guangzhou, the capital of Guangdong. Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China (ABC) and Bank of China (BOC) said the mortgage rates would drop by 20 basis points, to 5.4% for the first home purchase, and 5.6% for the second unit. “We are expecting more potential home purchasers to make up their mind about buying as mortgage rates get cheaper,” said Liu Zhen, a local real estate broker in Guangzhou. “There might be more supporting measures, for example a faster mortgage approval process. A recovery is just around the corner,” he added, as reported by the South China Morning Post.
