Chinese cities lower or scrap floor on mortgage rates to boost demand

BEIJING : Many Chinese cities have rushed to lower or even scrap the floor on mortgage rates for first-time home buyers in recent weeks, a research firm report said on Thursday, as authorities eased rules further in their bid to rekindle demand for residential property.

The Chinese central bank on Jan. 6 said it was allowing some cities with home prices falling month-on-month and year-on-year for three consecutive months to cut or abolish the floor on mortgage rates for first-home buyers.

At least 26 cities have taken such measures, including the mega-city of Tianjin and some provincial capitals like Zhengzhou and Fuzhou, according to a report by Shanghai-based firm E-house China Research and Development Institute.

China’s real estate market slumped sharply last year, with home prices and sales falling, property developers defaulting on debts and even stopping construction of new projects amid curbs on excessive borrowing and COVID-19 containment measures.

There are signs of a recovery in the sector, thanks to a flurry of state support measures and the government’s lifting of strict anti-COVID policies in December. Fragile demand, however, is still a key constraint on a full recovery.

Last month, home sales by floor area fell around 20 per cent from a year earlier, extending declines from December, as many home buyers hugged the sidelines even though visits to view housing projects in several key cities have increased, according to a China Index Academy report released on Wednesday.

A central bank quarterly survey in December showed only 16 per cent of residents polled planned to buy a home in the subsequent three months, the lowest since the third quarter of 2016.

“Still, more support is likely in coming months to stimulate demand, and the recovery trajectory of contracted sales will depend on the timeliness and effectiveness of further new measures,” said Kelly Chen, a Moody’s Vice President and Senior Analyst in a research note.