China’s top cities Beijing, Shanghai relax property curbs to boost housing market

 

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China’s capital city of Beijing and the financial hub of Shanghai on Thursday announced major relaxations of property measures, including lowering down payment requirements and reducing floor of home mortgage rates, in the latest efforts to boost home demand and support the sluggish housing market.

According to the notice released by Beijing’s municipal housing authority, the minimum down payment requirement ratio for first-time homebuyers will be reduced to 30% from previously 35% – 40%, while the downpayment requirement ratio for second-home buyers will be lowered to 50% in the six districts in urban areas and to 40% in non-urban areas from previous 60% – 80%.

The maximum mortgage loan term will be extended to 30 years from 25 years previously, and meanwhile, the lower limit of the interest rates on newly issued by banks will be lowered, according to the notice.

In addition, Beijing will also increase the size threshold that divides regular homes and “luxury homes” from 140 square meters to 144 square meters, which in effect allows more home purchasers to qualify for favorable policies. 

On the same day, Shanghai city announced similar policy adjustments, with the minimum downpayment requirement to be lowered to 30% for first-time homebuyers and 50% for second-home purchases or 40% in certain areas, according to a notice released by the municipal authorities.

The lower limit of home mortgage rates for first-home buyers will be reduced to “10 basis points below the benchmark lending rate LPR”, and that for second-home buyers will be cut to “20 basis points above the benchmark lending rate LPR,” according to the notice. 

Both Beijing and Shanghai said that the moves were aimed at better supporting demand for first-time homebuyers as well as demand for upgraded housing. The moves are also in line with favorable policies taken by many cities across China to spur home sales. 

Yan Yuejin, research director at the Shanghai-based E-house China R&D Institute, said that the policy adjustments in the two top cities will help lower the costs of home purchases and boost the confidence of both buyers and sellers. 

China’s housing market has been facing a downturn this year, with some developers struggling in cash crunch. China’s central and local governments have been taking measures to shore up housing demand and help meet real estate firms’ reasonable financing needs.

The annual agenda-setting Central Economic Work Conference concluded earlier this week called for efforts to prevent and defuse risks in key areas, including in the real estate industry. The meeting noted that reasonable financing needs of real estate enterprises of different ownerships should be met equally and the building of a new development model for the real estate sector should be accelerated.