China property: Shanghai relaxes home buying restrictions, grants subsidies for new flats to revive sector
- Residents offloading their existing flat to buy a new home will receive a subsidy of 30,000 yuan (US$4,142.50)
- Down payment ratios for first-time buyers have been cut to 20 per cent from 30, and to 35 per cent from 50 for people buying second homes
Shanghai, mainland China’s commercial and financial hub, will relax home purchase restrictions and grant subsidies to people buying new flats in a move designed to bolster the city’s real estate sector.
Down payment ratios for first-time buyers have been cut to 20 per cent from 30 per cent, and to 35 per cent from 50 per cent for people buying second homes, the Shanghai government said in a statement on Monday.
The minimum 5-year mortgage rate has been reduced to 3.5 per cent for first homes from 4.1 per cent, and 3.9 per cent from 4.5 per cent for second homes.
Households with two or more children are now eligible to purchase an additional unit, to meet the housing needs of families more than one child.
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Shanghai had barred household since 2011 from owning a third flat to curb the red-hot property market.
The authority will also allow more non-local residents to own a house in Shanghai.
People from other parts of mainland China who paid taxes to their local authorities for three years in a row will now be allowed to buy a flat in Shanghai. Previously they would have to have done so for to five years to qualify.
“Over the past month, we have received a lot of inquiries from non-local residents who are interested in owning a flat in Shanghai,” said Yan Zhancai, a consultant at an outlet of Lianjia, mainland China’s largest real estate brokerage, on Nanquan Road in Shanghai.
Shanghai has an inventory of new homes of about 8 million square metres, which could take more than a year to digest based on the current pace of sales, according to China Real Estate Information data.
“More tier-one cities such as Beijing, Shenzhen and Guangzhou are expected to follow, and offer supportive packages focusing on cutting down-payment or relaxing home-purchase restrictions,” said Yan Yuejing, director of the Shanghai-based E-house China Research and Development Institute. “It will be the next stimulus for the housing sector.”
China has rolled out a swathe of policies to clear excess housing inventory and ensure the timely delivery of new homes, as the country embarks on its most ambitious effort yet to rescue the moribund property market and shore up the broader economy.
In another move to stimulate demand, the central bank lowered interest rates on loans tied to individuals’ housing provident funds by 0.25 percentage points.
The package of measures underscores the determination of policymakers to rescue the property sector, which accounts for about a quarter of the country’s economy.
Recent official data showed that the property industry is still in a downward spiral. Prices of new homes in first-tier cities fell 0.6 per cent in April to cap an 11th straight month of decline.
Property investment dropped by 9.8 per cent year on year in the first four months of 2024.
“We think that property prices will remain under downward pressure for now. However, once the issues surrounding purchase price and sizing of unsold homes are resolved, property prices should begin to stabilise,” T. Rowe Price said.
“Even if the discounts are significant, finding a floor on prices will mark an important phase in this crisis and should gradually boost consumer confidence from its currently depressed levels.”
