Authorities in Beijing, Shanghai join the fray to ease mortgage lending rules to spur a slowing housing market

Authorities in Beijing and Shanghai said they would let first-home buyers enjoy preferential mortgage rates regardless of their previous credit records, joining the fray to ease financing rules to spur a slowing housing market.

Homebuyers will be regarded as first-time buyers if they – or their dependents – do not own property in the city starting from September 2, according to a statement by the central bank, the financial regulator and the housing ministry. That would make such buyers eligible for smaller down payment requirements and lower borrowing rates.

Applying the easing to “tier-one cities” such as Beijing and Shanghai “will definitely drive home sales in the short term,” said Fitch Ratings’ analyst Zhang Shuncheng. “The policy was used to be implemented in lower-tier cities.

With a population of 25 million residents, Shanghai is the largest metropolis to be chipping away at the raft of restrictions enacted since 2017 to cool a speculative property market. Hot on the heels of Shanghai’s announcement, Beijing said it was also relaxing its lending rules.

The rules, tightened to nip what was thought to be the start of a speculative property bubble in the bud, sent China’s housing market into a deep freeze. The property slump crimped developers’ earnings, denying them the cashflow to repay their outstanding bonds and loans. Country Garden Holdings, once China’s largest builder of residential real estate, teeters on the brink of a default as bondholders debate whether to call its bluff on a repayment plan.