Beijing makes it easier to buy homes, in latest measure to reverse real estate slump
BEIJING – China’s capital has loosened curbs on home purchases, the last of the country’s most developed cities to do so, in efforts to revive the struggling property sector.
Under measures announced on June 26 and effective from the next day, home buyers in Beijing will enjoy lower down payments and interest rates on mortgages.
Beijing’s move comes after the country unveiled sweeping measures on May 17 to reverse a protracted real estate slump, among them national guidelines on cutting down payments and mortgage rates.
In the weeks since, localities across the country have followed up to implement more supportive housing policies. Beijing’s roll-out lagged behind its Tier 1 city counterparts Shanghai, Shenzhen and Guangzhou – termed as the country’s most developed cities – by almost a month.
Analysts told The Straits Times that the relaxed restrictions on home buying have helped to stimulate consumers’ interest in purchasing homes, which had long been stymied by a persistent slide in prices. But whether this will translate into an actual housing market recovery still remains to be seen.
Beijing has lowered the minimum down payment first-time home buyers must make upfront from 30 per cent to 20 per cent of the total purchase cost. The minimum rate for second-time buyers has also been reduced to 35 per cent in urban areas and 30 per cent outside them, down from 40 per cent to 50 per cent.
Other policies announced include lower minimum interest rates for mortgages, with the five-year rate now at 3.5 per cent for first homes; more loans available to those buying eco-friendly properties; and a push for more developers and property agents to support trade-ins of old homes for new ones.
Beijing’s measures are similar to those rolled out in financial hub Shanghai and tech hub Shenzhen, where policymakers have elected to relax home buying costs less liberally than in other cities to avoid stoking new property bubbles.
These cities’ revised minimum down payment ratios are at least 5 percentage points higher than the national floor, and they still impose minimum mortgage rates even as these have been scrapped at the national level for first- and second-time buyers.
“Tier 1 cities have been more cautious,” property analyst Zhang Xiaoduan told ST, as “the overall direction is still that houses are for living in, and not for speculation”.
These cities are China’s most economically dynamic, drawing large inflows of people and, in turn, demand for housing. This makes properties attractive to investors, said Ms Zhang, who is based in Shenzhen as deputy dean of real estate services firm Cushman & Wakefield’s research institute.
Even as they try to stimulate the market, policymakers there might want to avoid a situation where cheaper down payments incentivise people to take on more leverage and speculate on property, she explained.
In contrast, export hub Guangzhou’s policies are looser – hewing more closely to the national guidelines that most other cities have adopted – as the market there is larger and less susceptible to buyer speculation, with prices lower than in the other Tier 1 cities. This heterogeneity reflects how the central government’s real estate policies are being adapted to each city’s conditions, she added.
It has been six weeks since China put forth its most significant measures yet to rescue the property sector. Apart from slashing down payments and mortgage rates to boost consumer demand, the central government’s policy package also included a push for local governments and state-owned enterprises (SOEs) to help reduce a glut of excess homes by buying these and turning them into affordable housing.
While potential buyers had hitherto adopted a wait-and-see attitude towards property purchases as prices continued to fall, “there has since been a rise in the number of property viewings and inquiries posed”, said Hong Kong-based equity analyst Jeff Zhang from the financial services firm Morningstar.
Chinese media outlets have reported bustling crowds at new apartment sales venues and increased turnouts for property viewings since the policy package was announced.
“But for this to translate into an actual improvement in home sales figures will take three to six months,” he told ST. “There needs to be a sufficient volume of transactions made before property prices stop falling, and buyers feel confident enough to make purchases.”
He will be keeping an eye on real estate sales data in the second half of 2024 to see if a steady recovery emerges.
New home prices fell 0.7 per cent month on month in May, official data showed, the sharpest drop in almost a decade. Declines were recorded in 68 of the 70 medium-sized and large cities that the statistics bureau tracks.
“This shows that the work of reducing inventories across localities needs to be accelerated,” said Mr Yan Yuejin, director at the Shanghai-based E-house China Research and Development Institute, in a note issued on June 17. He noted that the price drops also reflected efforts by property companies to sell off more units by offering discounts.
Bloomberg Economics estimates that there is an equivalent of 60 million unsold apartments across the country, which will take over four years to sell without government aid.
The central bank has set up a 300 billion yuan (S$56 billion) relending facility, that could translate into as much as 500 billion yuan in financing from banks for SOEs to buy unsold homes at “reasonable prices”, and convert these into affordable housing. But it falls short of the one trillion to five trillion yuan that analysts estimate is required to digest this inventory, Bloomberg reported in May.