Chinese authorities proposed a further easing of mortgage policies to support the real estate market. It marked the first nationwide relaxing of the housing credit policy after a tone-setting top meeting in late July and the recent State Council executive meeting, which some industry insiders predict will produce an immediate effect on the industry that accounts for around 7% of the country's GDP. Observers said the measure, together with other stimulus moves, is a timely boost to spur and consolidate market confidence, as the recovery of China's economy is confronted with increasing pressure, including a property slowdown. This shows that the Chinese authorities have rich policy toolkits at their disposal, allowing them to act swiftly to tackle emerging headwinds in a systematic way, analysts said. A Chinese government meeting chaired by Premier Li Qiang approved a guideline for planning and constructing affordable housing. The guideline is conducive to expanding effective investment, promoting the sound and stable development of the property sector, and is an important measure to promote a new development model, the meeting pointed out.
Two government agencies and the country's central bank issued detailed rules to allow local governments to adjust mortgage lending-related policies and measures regarding the identification of first-home buyers. A household whose family members do not own a property at a certain locality is eligible for the credit policy for first-time homebuyers, regardless of whether it has previously applied for a housing loan, according to the notice issued by the Ministry of Housing and Urban-Rural Development, the People's Bank of China (PBOC) and the National Financial Regulatory Administration (NFRA). This is part of “the one city, one policy” strategy allowing city governments to decide whether to adopt the policy, according to the notice. The policy will enable more homebuyers to enjoy preferential downpayment ratios and interest rates for first-time home loans, which will help reduce the cost of homeownership for residents and better satisfy the demand of those seeking to enter the market for the first time, or upgrade their housing. “It is in line with the central government's policy direction for the property market and the market's long-awaited expectations for further support, so the market effect should be visible soon,” Yan Yuejin, Research Director at the Shanghai-based E-house China R&D Institute, told the Global Times.
It also has strong ramifications for the stabilization of investment in China, observers said. The measures are set to dispel market worries over a property downturn, as investors will come to understand that the authorities have abundant policies in the pipeline to deal with rising challenges. Under the policy, Chinese consumers are able to enjoy the dual policy effect on “downpayment and mortgage interest rate” for first-time homebuyers, Yan said. Downpayments have been reduced to an average of around 33% of the total house price from around 73%. Yan said that for anyone purchasing a property valued at CNY6 million, the downpayment is brought down by CNY2.4 million, significantly reducing the stress on homebuyers. Currently, the average lending interest rate for first-time homebuyers is 4.5%, compared with 5.03% for people who have more than one apartment, which is estimated to reduce mortgage payments by an average of CNY470,000 over 30 years in first-tier cities.
The policy mainly targets owners with sufficient funds who want to upgrade their homes. Observers expect the policy to further increase GDP and the boost to housing consumption will help real estate enterprises to recover. In the first seven months, sales of commercial residential houses plunged 1.5% to CNY7,045 billion, data from the National Bureau of Statistic (NBS) showed. The Ministry of Finance also extended individual income tax reductions for those who sell their home and purchase another within a year from January 1, 2024 to December 31, 2024, the Global Times reports.
