China eases home purchase rules in new push to boost economy

China unveiled a further easing of its mortgage policies to halt a slump in its residential property market and revive growth in the world’s second-largest economy.
The country is proposing that local governments can scrap a rule that disqualifies people who’ve ever had a mortgage - even if fully repaid - from being considered a first-time homebuyer in major cities, official Xinhua news agency reported yesterday, citing the Ministry of Housing and Urban-Rural Development, the People’s Bank of China and the National Administration of Financial Regulation.
City governments can have leeway on whether to adopt the policy, according to the notice.
China’s real estate sector is unravelling and risks are spreading to the country’s $60tn financial system. China’s existing policies have failed to sustain a rebound in the property market as price declines extend across the nation, putting the government’s 5% economic growth target at risk.
The government also said it will extend the personal income tax rebates for people who buy new homes within one year after selling old homes till the end of 2025, according to a statement from the Ministry of Finance.
While Chinese stocks posted a knee-jerk rally on the news, the benchmark CSI 300 Index erased nearly all of those gains within 30 minutes. It was trading 0.6% lower as of 2.29pm in Shanghai. “The policy is certainly positive and supportive to housing demand,” said Bruce Pang, chief economist and head of research for greater China at Jones Lang LaSalle Inc. “But in terms of its impact on the property market, we will need more time for confidence and sentiment to recover under the downward spiral of home prices. We’re not at a turning point yet.”
Country Garden Holdings Co, a developer that was once a pillar of the industry, is on the verge of default, suggesting no company is too big to fail. More developers are on the brink, home prices are collapsing in smaller cities, and shadow bank Zhongrong International Trust Co missed payments on dozens of high-yield investment products this month, sparking protests outside its headquarters in the Chinese capital.
In at least ten of the biggest cities, homebuyers with a mortgage record who don’t own a property have been subject to higher down payment requirements and more restrictive borrowing limits. That has suppressed demand as these people have been treated as second-time buyers. In the capital of Beijing, a second-time buyer needs to come up with a down payment of as much as 80% of the property’s value. The down payment is 40% for first-timers.