Beijing, China’s capital, has finally joined other major Chinese cities in relaxing home buying restrictions to bolster the property market.
The Beijing Municipal Commission of Housing and Urban Development said on Wednesday that it was lowering the down payment ratio for first-time homebuyers to 20 per cent from at least 30 per cent previously. For buyers of second homes, the ratio is being reduced to 30 per cent for areas outside Beijing’s fifth ring road and to 35 per cent for areas within.
The minimum five-year mortgage rate will be reduced to 3.5 per cent for first homes, according to the housing department. The interest rate on second homes outside the fifth ring road will be cut 3.7 per cent and to 3.9 per cent for second homes within the ring road.
The move mirrors the decisions of Shanghai, Shenzhen and Guangzhou to lower their mortgage rates and ease home buying restrictions to boost sentiment. The southern city of Guangzhou has the lowest minimum down payment requirement of 15 per cent and 25 per cent for first and second homes, respectively.
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“Reducing the down payment ratios is the most significant policy [move so far this year],” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.
The move by Beijing’s municipal government to reduce the down payment ratio will have the obvious effect of reducing buying costs and also help boost housing demand, Yan said.
China’s central government issued an ambitious plan to rescue the crisis-hit property sector last month, including a 300 billion yuan (US$41.4 billion) relending facility and allowing local governments to buy excess inventory.
About 10 provincial cities, including Nanjing, Tianjin and Chengdu, recently adjusted their property policies, with measures such as lowering the down payment ratio and providing subsidies on trading in of homes.
Shanghai was the first mover among tier-one cities. China’s biggest metropolis decreased the down payment ratio for first-time buyers to 20 per cent from 30 per cent, and to 35 per cent from 50 per cent for buyers of second homes. Each household opting for the trade-in scheme is eligible for subsidies of up to 30,000 yuan.
Additional reporting by Yulu Ao