China’s housing market gets lifelines as cities, lenders ease down payment and financing to arrest slump

Lived-in home sales in Shenzhen shrank last year to a 15-year low, according to an industry association; January sales in Guangzhou fell 56 per cent
‘Policy easing may have entered a new phase,’ according to Zhang Zhiwei, chief economist at Pinpoint Asset Management

China property

Pearl Liu

Published: 7:30am, 23 Feb 2022

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More mainland Chinese cities are taking steps to shore up the property market as local governments and lenders eased the requirements on down payments and mortgage financing to arrest the worst slump in home sales in a decade.

In Heze, a city in northern Shandong province, four major banks have lowered the minimum deposit for home purchases this week to 20 per cent from 30 per cent, according to some buyers who spoke to the Post. Buyers in Beihai in southern Guangxi province have been able to borrow 60 per cent of the cost to fund their second homes, up from 40 per cent in January, according to the Provident Fund Centre.

“It signals policy easing in the property sector may have entered a new phase,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong. “I would expect more cities to follow Heze to cut the down the payment ratio.”

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China’s US$1.7 trillion housing market has shown widening cracks of late as the economy grew in the fourth quarter at the slowest pace in 18 months amid the pandemic and a stock market slump.

Sales, measured by contracted volume at the nation’s 100 biggest developers, shrank 41 per cent in January from last year to 526.6 billion yuan (US$83 billion), according to data compiled by the China Real Estate Information Corporation, which compiles industry data.

Lived-in home sales in Shenzhen, the wealthiest city in southern Guangdong province, shrank in 2021 to a 15-year low, according to the Shenzhen Real Estate Intermediary Association. Guangzhou recorded only 7,000 sales in January, a 56 per cent drop from a year earlier, according to property intelligence provider CRIC China.

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Since mid-December, Chinese policymakers have injected liquidity as the economy lost momentum amid an energy crisis while inflation quickened and debt defaults ballooned. The central bank has lowered the reserve-requirement ratio and mortgage reference rates, and tweaked its lending facility to revive growth, fueling a robust credit expansion in January.

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“The local governments likely face mounting pressure to stabilise the property market,” said Zhang, citing a 72 per cent drop in land-sale proceeds in January. “This is important as land sales accounted for around 43 per cent of local government revenue in 2021.”

The local government in Nanning, another city in Guangxi province, said on January 15 that buyers can access 700,000 yuan of provident fund loans for their first home and 600,000 yuan for their second unit. Both represent a 100,000 yuan increase from previous limits.

“The relaxation measures are a strong signal that the government would like to repair the damage to the sector and restore market confidence,” said Pan Hao, a senior analyst at the Beike Real Estate Research Institute in Beijing.

Lenders have cut loan rates for both first time and second time home buyers in Guangzhou, the capital of Guangdong, according to state-backed media reports.

Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China and Bank of China said the mortgage rates would drop from Monday by 20 basis points, to 5.4 per cent for the first home purchase, and 5.6 per cent for the second unit.

“We are expecting more potential home purchasers to make up their mind about buying as mortgage rates get cheaper,” said Liu Zhen, a local real estate broker in Guangzhou. “There might be more supporting measures, for example a faster mortgage approval process. A recovery is just around the corner.”

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