China’s new housing finance rules reduce the risk of buying a new home but analysts are not convinced they will be enough to tempt hesitant buyers still weighed down by falling prices and weak confidence.
The changes are designed to reduce the risk in buying pre-sold homes. Mortgage funds for pre-sold homes will be released only after submission of the project completion filing, when the homes are certified as safe and ready to move in, rather than when the main structure is finished. The maximum mortgage term has also been extended to 40 years from 30.
The measures address a problem that emerged during China’s property downturn, when some buyers were left paying mortgages on homes that developers struggled to complete.
But analysts said concerns about handover were only one factor behind the decline in home purchases.
“I don’t think the primary goal of this reform is really to … stimulate property demand,” said Karl Choi, head of China property research at Bank of America. “It is [just] the right thing to do.”
Choi said the reforms pointed to a move towards a system in which buyers had greater certainty about what they were purchasing. If homes were increasingly sold after completion, “what you see is what you get”, he said, adding that it also reduced the risk of unfinished projects.
