Shenzhen scraps use of guide prices in mortgage applications to boost homebuyers’ spending power, revive flagging market
- Shenzhen is scrapping the use of guide prices as a reference for mortgage applications for lived-in homes in a bid to spur sales, say property agents
- Previously, if the guide price was lower than the transaction price, the buyer would get a smaller loan and have to fork out a larger down payment
Shenzhen became the first mainland Chinese city to publish a reference price list for pre-owned homes in more than 3,500 residential communities to guide property agencies to issue reasonable listing prices and help banks to contain bad-loan risks.
Under the system, if the guide price was lower than the final price agreed for the property, the buyer would get a smaller loan and therefore have to fork out a larger down payment.
The cooling measure had an immediate effect. Second-hand home transactions dropped by more than half to 40,299 in 2021, and plunged again to 20,000 in 2022, the lowest level in 20 years, according to a research report released by property broker Leyoujia, based in the city.
11:05
China housing: Can the world’s biggest housing market boom again?
Although the reference prices themselves will remain in place, banks will no longer be required to base their mortgage loan calculations on them.