China has begun the new year by extending its policy of easing mortgage rates and pledging “strong support” for first home purchases with the aim of turning the tide for its ailing property market. Both moves signal the country’s intention to keep relaxing its grip on the property sector and stimulating demand in a sluggish market throughout 2023, analysts said. On Thursday evening, Ni Hong, the minister of housing and urban-rural development, appeared on national television to reiterate Beijing’s vow to boost confidence in the real estate market. Speaking to state media, he promised “strong support” for first-time buyers by lowering down payment ratios and mortgage rates. He said there would be “reasonable support” for those buying a second home, and “policy support” for those shopping for a better home for a big family. His remarks came shortly after a notice was issued by the People’s Bank of China on the same evening. The central bank said if newly-built home prices drop for three consecutive months in a year, local authorities can choose to maintain, lower or even eliminate minimum interest rates on loans for a first home. The positive signals from Beijing sent the Hang Seng Mainland Property Index up 1.6 per cent by the middle of Friday afternoon. Shares of developers Longfor Properties and Country Garden gained 3.7 per cent 2.3 per cent, respectively. China’s property market has been rattled by slumping home prices, weak sales and a crippling debt crisis among major developers. It is one of the country’s most important sectors, supporting its rapid economic growth. According to data from the National Bureau of Statistics, 38 cities including the port city of Tianjin, manufacturing hub Changchun, and the coastal city of Xiamen, saw new home prices drop for three consecutive months recently, up from 23 in early 2022. Chinese buyers bought 10.8 trillion yuan (US$1.58 trillion) worth of new homes as of the end of October, around 25 per cent short of the same period in 2021. The central bank explained that the move to link interest rate policy to new home price trends and adjust it accordingly would help “better support housing needs and form a long-lasting mechanism to support the property sector’s steady and healthy growth.” Thursday’s notice is an extension of a policy announced in September that was due to come into force last month. Data compiled by the Beike Research Institute showed that mortgage rates for first and second homes in December were at a record low of 4.09 per cent and 4.91 per cent respectively. The notice sent a strong signal that “the credit policy will continue to be relaxed in 2023”, with an emphasis on supporting housing demand, said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute. He expects more second- and third-tier cities to lower or eliminate minimum mortgage rates. Li Yujia, a senior economist at the Guangdong Urban and Rural Planning and Design Institute, said both moves, by the central bank and the housing authorities, aim to “create incentives to guide and improve market expectations” in order to “stabilise housing demand as quickly as possible.” He believes the timing is right, and it can set the market on the right course throughout the year. “To set a robust start for economic growth, it’d be great to see a small peak in property sales before and after the Lunar New Year,” Li said. “Many people haven’t gone home for Lunar New Year for two years, and local people don’t have an urge to buy homes due to the pandemic. The policy aims to stimulate market demand.” Tyran Kam, head of China property at Fitch Ratings, expects easing measures and signals to continue this year as Beijing is “committed to stabilising the real estate sector.” “China’s emergence from the zero-Covid policies, while it will likely lead to near-term volatility, is positive for economic growth. This, together with these easing signals, will likely drive a recovery in homebuyers’ sentiment, especially in the higher-tier cities,” he said. Additional reporting by Pearl Liu
