Guangzhou, Shenzhen ease home mortgage policy, other major Chinese cities expected to follow suit

 

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China’s southern metropolis Guangzhou and Shenzhen, two of China’s top tier cities, eased home mortgage policies, in a move to revive the sluggish housing sector.

In Guangzhou, provincial capital of Guangdong province, home buyers and their immediate family members will be recognized as first-time home buyers when they apply for home mortgage loans as long as they don’t now own another home in the city, even if they have previous mortgage record, according to a notice issued by Guangzhou municipal government on Wednesday.

Guangzhou is the first top-tier city in China to announce such policy relaxation. The new policy applies to home purchase contracts signed after August 18, it said.

Later on the same day, Shenzhen city, also in Guangdong province, announced the similar policy to relax the rules for recognizing first-time home buyers, to support the housing market, taking effect from Thursday, according to a notice issued by the city’s Housing and Construction Bureau, Branch of the People’s Bank of China, and the Shenzhen office of the China Banking and Insurance Regulatory Commission.

Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, said that, as the first mover among first-tier cities, Guangzhou has set a good example. “Guangzhou’s measures send a strong signal and reflect the major changes in the home supply and demand relationship in the cities,” Yan said.

All of China’s first-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – had issued statements in early August, vowing to make further efforts to support the property market, in response to the central government’s pledge to stabilize the real estate sector. But Guangzhou was the first to announce specific measures.

 “All of the four cities will eventually announce eased measures, given the current market situation,” Yan said, noting that such moves are necessary to boost confidence in the property sector, which plays a major role in fueling China’s sluggish economic growth.

The other major cities will probably announce new policies by early September, Yan estimated. As for details of the policy, “it depends, because home sales in the urban areas of the other major cities are still a bit hot,” he said.

According to the E-house China R&D Institute, the down payment ratios for second houses in the four cities were 70-80% under the purchase curbs, which were 40-45 percentage points higher than down payments for first homes. First-home buyers usually get lower mortgage rates and make smaller down payments than others.