CHINA said yesterday it will cut the minimum downpayment for first-time home buyers in many cities, stepping up support for the sluggish property market and stumbling economy.
It was the second measure in two days to fire up consumption following a decision to halve the tax on the sale of small cars.
The central bank and banking regulator said they will lower the minimum downpayment for first-time home buyers to 25 percent, from 30 percent, in cities that do not have purchase restrictions.
The move aims to “support reasonable consumption of housing,” the People’s Bank of China and China Banking Regulatory
Commission said in a statement on the central bank’s website yesterday.
China’s property sector has hit a weak patch in the past year or so, with slowing sales leading to an overhang of unsold apartments and affecting demand for everything from steel to home appliances.
“The relaxed rule is helpful, but the impact will not be immediate because the main reason for high inventory in some cities is bad location and transportation,” said David Ji from Knight Frank.
“The rule will likely stimulate demand from buyers who are already observing,” he said.
The property sector accounts for 15 percent of China’s gross domestic product, so even modest signs of improvement would relieve some pressure on the economy.
Home prices rose for a fourth consecutive month in August as sales and market sentiment improved.
In a separate move yesterday, the housing ministry asked local governments to increase financial support to home buyers funding their purchases with housing provident funds.
Still, analysts don’t expect a full-blown turnaround in the property market any time soon, as the huge overhang of unsold homes discourages construction and investment in all but the biggest cities.
Haitong Securities said the move “shows the government’s intention to stabilize the property market. We expect favorable policies to be sustained until investment starts to recover.”
While home sales and prices have picked up in the past couple of months, annual growth in property investment in the first eight months of the year slowed to 3.5 percent, its lowest since early 2009.
The lower downpayment requirements will not apply in certain big cities such as Beijing, Shanghai and Shenzhen that have imposed restrictions on buying to prevent bubbles.