China is preparing measures to counter a housing market slump and will roll them out if the economy needs support, people with knowledge of the matter said.
The government could reduce down-payment requirements for second homes, the people said, declining to be identified as the information is not public. Another step could be letting homeowners sell properties without paying sales tax after two years, down from five years, they added.
The contingency plans come amid signs of a deepening decline in the real-estate industry in the world’s No. 2 economy. China’s new-home prices posted a record year-on-year decline last month, according to a Bloomberg Intelligence analysis of government data tracking 70 cities.
While a gauge of manufacturing yesterday indicated some stabilization in what has been a protracted slowdown in China’s factories, economists still anticipate that policymakers will increase stimulus measures to shore up growth.
“The government is quite concerned,” Citigroup Inc Hong Kong senior China economist Ding Shuang (丁爽) said by telephone.
While the manufacturing data “shows some rebound, the overall economic downturn is not arrested. The government will carefully monitor the economic data and react,” Ding said.
Implementation of the easing policies would depend on whether an economic downturn continues or worsens, the people said.
The Chinese Ministry of Finance did not immediately respond to faxed questions on the measures.
The central bank on Sept. 30 last year allowed people applying for a loan to buy a second home to qualify for lower down payments and mortgage rates previously available only to first-time homebuyers, as long as they had paid off their initial mortgage.
Under existing rules, first-home buyers pay a 30 percent down payment, rather than at least 60 percent required for a second home. They can also get as much as a 30 percent discount on mortgage rates from the central bank benchmark.
“The news is generally positive. The message is, the government will not let the real-estate market go into free fall,” Ding said.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
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