China mulls easing mortgages to spur homebuying in big cities as existing policies fail to sustain property market rebound

Regulators are weighing scrapping rules that disqualify people who have had a mortgage from being considered a first-time homebuyer in major cities, sources say

Plans are under discussion after state banks submitted mortgage data and feedback to the regulators over the past few months

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People relax by a lake near residential buildings in Hegang city in northeastern China’s Heilongjiang province. Photo: AFP

Published: 4:25pm, 20 Jul 2023

Chinese authorities are considering easing home buying restrictions in the nation’s biggest cities, potentially removing a hurdle that has curbed demand in Beijing and Shanghai for years, according to people familiar with the matter.

Regulators are weighing scrapping rules that disqualify people who have ever had a mortgage – even if fully repaid – from being considered a first-time homebuyer in major cities, said the people, asking not to be identified discussing a private matter. Currently homebuyers with a mortgage record who do not own a property are still subject to the higher down-payment and more restrictive borrowing limits applied to those buying a second home.

Some state banks have submitted relevant mortgage data and feedback to the regulators over the past months, one of the people said. The plans are under discussion and have yet to be approved, they added.

China’s existing policies have failed to sustain a rebound in the property market as price slumps extend across the nation, putting the government’s 5 per cent economic growth target at risk. Gross domestic product figures released on Monday showed the recovery lost momentum in the second quarter, intensifying calls for more stimulus.

“In a normal market such loosening is likely to lift the sentiment immediately, but it’s not a normal market now,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. More easing measures are needed, such as reducing mortgage rates which are much higher in top cities, he added.

Policymakers have so far been cautious about rolling out broad support, instead relying on targeted measures to boost household spending such as extending tax exemptions on electric car purchases. The government also took a step towards supporting the ailing property market by extending loan relief for developers this month, adding to a slew of measures in a sweeping 16-point rescue package last year.