Major Chinese banks in the eastern city of Heze have cut mortgage down payments for some homebuyers, the first such move in the country to boost flagging housing demand, local media reported.
The big four state-run lenders — Bank of China Ltd (中國銀行), Agricultural Bank of China Ltd (中國農業銀行), Industrial and Commercial Bank of China Ltd (中國工商銀行) and China Construction Bank Corp (中國建設銀行) — lowered the down payment ratio for first-time homebuyers in the city of 8.8 million in Shandong Province to 20 percent from 30 percent, the reports said.
China News Service-backed Economic View and Shanghai-based Cailian reported on the cut on Thursday evening. Caixin, citing unidentified sources, confirmed the reports yesterday, saying Heze is taking “a leading step to shore up the sagging property market,” as banks in most Chinese cities currently require new buyers to put down 30 percent of the purchase price.
Chinese authorities have been racing to arrest a worsening slowdown in the property sector that is hurting growth in the world’s second-largest economy. Home sales have been falling since July last year, exacerbating a cash crunch among developers.
“A change in the down payment threshold will have a big impact on homebuyers,” China Index Holdings associate research director Chen Wenjing said. “More smaller cities may follow suit, especially tier-3 and tier-4 ones that are seeing a heavy slowdown.”
The mortgage down payment cut in Heze has sent a signal to other municipalities that authorities are making efforts to meet demand from first-time homebuyers, Cailian cited industry analysts as saying.
In the city, Agricultural Bank of China has also cut mortgage rates for first-time buyers to 5.6 percent from 5.95 percent at the end of last year, the report said.
An official at Heze’s housing department declined to comment.
Heze has been at the forefront of policy easing in the past. In 2018, it changed rules to make it easier for people to sell homes. The city also benefited from a redevelopment program financed largely by central bank stimulus.
Heze is the home town of Peng Liyuan (彭麗媛), Chinese President Xi Jinping’s (習近平) wife and China’s first lady.
Home sales in Heze’s urban area dropped 58 percent in December compared with a March high, according to E-house China Research and Development Institute.
Measures taken recently by Chinese authorities to address the nationwide property slump include boosting lending to developers and encouraging state entities to take over distressed assets of indebted borrowers. Local media this month reported that the government has issued rules to make it easier for developers to tap cash from home presales, potentially easing the liquidity crunch engulfing the sector.
The move in Heze “signals policy easing in the property sector may have entered a new phase,” Pinpoint Asset Management Ltd chief economist Zhang Zhiwei said.
If the People’s Bank of China does not ask lenders to revert the policies, more cities might follow suit, Zhang said.
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