Housing buzz about easing in more cities grows

A view of a property construction site in Nanjing, Jiangsu province. YANG BO/CHINA NEWS SERVICE

China's property market is rife with speculation that more cities will announce cuts to mortgage interest rates and down payment ratios, as several cities have done in the past few days.

Market insiders said they expect each city to announce new measures that factor in local conditions. Together, such steps will likely spur housing demand nationwide, potentially aiding the industry's stable and healthy development.

In response to a series of high-profile supportive policies announced by Chinese authorities on May 17, several cities announced new measures to shore up their local housing market.

"Cities including Wuhan in Hubei province and Huzhou in Zhejiang province have reportedly lowered down payment ratios for first-home buyers to as low as 15 percent, suggesting there is a high chance for other Chinese cities to guide the ratios down," said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution.

On May 17, the country removed minimum requirements for commercial mortgage rates for first and second homes nationwide. It also lowered minimum down payment ratios for first and second homes to 15 percent and 25 percent, respectively.

This adjustment lowered the down payment ratio for commercial housing to a historic low, which will release inelastic demand from both first-home buyers and those willing to upgrade to a better home, property experts said.

"The new down payment ratio will effectively lower the threshold for homebuyers, naturally leading to a rebound in homebuying demand," Wang Yifeng, an analyst at Everbright Securities, was quoted as saying by Shanghai Securities News.

Apart from lowering down payment ratios, cities like Beijing, Shanghai, and Shenzhen in Guangdong province and Hefei in Anhui province also announced other supportive measures, like cutting interest rates of home mortgages and housing provident funds. Such moves followed the central bank announcements on May 17 that it would further lower mortgage interest rates as well as housing provident fund rates.

On Saturday, Shanghai lowered down payment ratios for the housing provident fund, effective Jan 1, 2025.

Some commercial banks in Central China's Wuhan went further by lowering the first-home loan interest rate to as low as 3.25 percent, Yan said.

"The reductions in down payment ratios and mortgage rates will encourage nonlocals and potential homebuyers to make up their mind on whether or not to buy residential properties," said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

The rate cuts mean monthly repayments of home loans will be substantially lower. People may afford a home without sacrificing too much on daily consumption, Li said.

Prior to the May 17 policies, a majority of Chinese cities had lowered their down payment ratio to between 20 percent and 30 percent (of the total cost of the housing unit). With eight cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, readily implementing the new policies, several other cities are now expected to follow suit, said Chen Wenjing, director of research with the China Index Academy.