Move can help boost property demand: experts
China announced on Tuesday that the minimum down payment required for first- and second-time home buyers in most cities will be reduced.
Experts noted that the move is in line with the central government's strategy to reduce inventories of unsold property in the housing sector and that it will stimulate demand.
Vitality in the housing market will be supported with a slew of government policies ranging from more plans for the urbanization of China's rural population to the loosening of household registration policies and further interest rate cuts, experts said.
The People's Bank of China (PBC) and the China Banking Regulatory Commission (CBRC), the central bank and the banking regulator, said the minimum down payment for first-time home buyers will be cut to as low as 20 percent from the current 25 percent in cities that do not have restrictions on purchases. Many Chinese cities imposed restrictions on home purchases in 2010 to rein in runaway prices.
The minimum down payment requirement is still 25 percent in principle, regulators said, but local governments outside restricted cities will be allowed to further lower the rate by 5 percentage points.
The move is aimed at "supporting reasonable consumption of housing and promoting the sound development of the property market," the PBC and the CBRC said in a joint statement posted on the central bank's website Tuesday.
Hao Juncheng, an analyst with financial information provider rong360.com, said that the new policy will strengthen booming markets in some cities and stimulate lackluster markets in others. But the policy will mainly affect smaller cities that do not have restrictions on purchases, he said.
The strength of the nation's housing market varies widely in different localities. The four first-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - experienced bigger price rises in December 2015, but the prices in many smaller cities continued to decline, according to data released by the National Bureau of Statistics (NBS) in January.
In Shenzhen in South China's Guangdong Province, new housing prices increased 47.5 percent year-on-year in December 2015, the biggest rise among all the monitored cities.
"The housing market in first-tier cities is good, thanks to strong demand, scarcity of resources and total population. They don't face the issue of reducing inventory," Yuan told the Global Times Tuesday.
Propping up demand
As of January 22, 41 out of the 46 cities that had imposed home purchase restrictions had lifted the measures, leaving only Beijing, Shanghai, Guangzhou, Shenzhen, and Sanya in South China's Hainan Province still holding restriction policies on home purchases, according to a report by Beijing-based China Times newspaper on January 30.
"In cities with high inventory pressure, the new policy will affect the attitude of those buyers with uncompromising demand, and might prompt them to make purchases. For buyers who wish for a better home, the policy could ease their financial pressure to some degree," Yuan said.
The nation's loosened family planning policy will also generate demand for more houses, he noted. The policy was announced after a key Party meeting held in October 2015.
Liu Hongyu, director of Tsinghua University's Hang Lung Center for Real Estate, told the Global Times Tuesday that the new policy will lower the threshold for home purchases, thereby stimulating demand.
"But home buyers' ability to secure housing loans is another factor in home purchases," Liu noted.
"If you put China's down payment requirement in a global context, it is still comparatively stringent," Liu said.
"Amid the new normal of slower economic growth, risks are more under control, and this allows regulators to lower the down payment threshold," Liu said, noting that the down payment relates to the risks that banks face.
The last time regulators cut the minimum down payment was in September 2015.
In December 2015, the central government said it would adopt more measures to tackle excessive property inventories.
