New | Fujian province first to relax housing policies this year in China; cuts downpayment for buyers
China’s Fujian province relax housing policy
Fujian has become China’s first province to relax local housing policies this year, reinforcing expectations that more supportive measures will land soon.
However, the impact has yet to be seen. Strong vocal support from top government officials, including Premier Li Keqiang, and further monetary relaxation have so far failed to talk the market out of its downturn. And many developers have moderated sales target to single-digit growth this year from last year’s level above 20 per cent.
The Fujian Daily, a provincial party mouthpiece, reported over the weekend that upgraders – those buying their second homes for newer and better facilities, larger space and locations nearer to their kids’ schools – will be treated the same as first-time buyers, with the down payment for both groups lowered to 20 per cent from 30 per cent previously.
“The government will roll out more steps to stabilise the property market, but strong stimulus is unlikely,” said Li Wenjiang, chief analyst at consultancy Hopefluent (China).
He said developers would cut prices to speed up inventory sales while launching new products catering to upgrade demand with a price rise of 5-10 per cent.
Fujian’s move came after the cities of Jinan and Guangzhou cut the down payment for first-time home buyers to borrow from local housing provident funds.
Premier Li Keqiang earlier this month said China would encourage housing demand from first-time buyers and upgraders. There are also media reports that the housing ministry would soon take such measures nationwide and reduce the mortgage rates.
Fujian will buy developers’ inventories for use as new homes to families whose old ones are pulled down to make way for city redevelopment, a measure already adopted by some cities including Ordos, a widely known ghost city in Inner Mongolia. Such a measure will reduce real estate investment, which directly drives about 15 per cent of China’s gross domestic product.
Apart from that, the market has repeatedly speculated since the second half of last year that the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen will soon relax home purchase restrictions. So far, there is no official confirmation that such a step has been taken.
Economists expect China’s central bank will cut interest rates further after twice reducing them since November in a move to reduce developers’ funding cost and improve housing affordability for home buyers.
Despite easier policies, property data in the first two months disappointed, with sales falling 16.3 per cent in the first two months from a year earlier, widening quickly from a drop of 7.6 per cent for all of 2014. The government’s land sale revenue also tumbled 36.2 per cent in the first two months from a year earlier, a reflection of developers cautious stance in land acquisitions.
