Beijing Becomes Last Mega China City to Ease Housing Rules

Bloomberg News

Wed, Jun 26, 2024, 7:27 PM3 min read

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(Bloomberg) -- China’s capital city of Beijing eased homebuying requirements for downpayment and mortgages, joining the country’s other mega cities to support the real estate sector.

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Beijing reduced downpayment requirements by 10 percentage points to a minimum of 20% for first-time buyers, the city said in a statement Wednesday. For second homes, the minimum threshold was cut to 35% for urban areas and 30% elsewhere. It also lowered the floor on mortgage rates.

The move means all four so-called tier-1 cities have now followed through with easing after the central government unveiled a package to unleash 300 billion yuan ($41 billion) of funding to buy unsold homes. Shanghai, Shenzhen and Guangzhou slashed downpayment requirements and allowed room for cheaper home loans last month in a bid to revive demand.

China’s three-year housing slump has pummeled the economy and continues to afflict even its biggest urban centers. Investors and analysts remain skeptical that existing measures will be sufficient due to the limited central bank funding revealed so far and the slow progress of existing trial programs in several cities.

Beijing also eased home-buying rules further for families with at least two children. Such families can enjoy downpayment threshold and mortgage rates applied for first-home buyers even if they are purchasing their second residences.

The easing “might not move the needle in lifting property sales as a dim outlook for housing prices and employment continues to drag on sentiment,” Bloomberg Intelligence analysts led by Kristy Hung wrote in a note on Thursday. After similar loosening, new-home sales in Shanghai only rose 8% in the first 23 days of June from a month earlier, according to the note.

A Bloomberg gauge tracking major Chinese developers fell 1.1% on Thursday morning, extending this year’s decline to 15%. Shares of state-owned China Overseas Land & Investment Ltd., which has the biggest land exposure to Beijing among builders tracked by Bloomberg, dropped 3.6% in Hong Kong.

Beijing faces the worst housing oversupply among 30 major cities tracked by China Real Estate Information Corp. Its inventory of new homes needs 48.9 months to sell, CRIC estimated before the easing announcement. The capital’s new-home prices slumped 1.1% in May, the worst drop in almost a decade, the latest official data showed.

Top policymakers urged officials in a cabinet meeting earlier this month to keep an “open mind” over measures to reduce housing inventory and be more “creative and bold” in rolling out support.

It would take more than four years to offload the nation’s 60 million unsold apartments without government aid, according to Bloomberg Economics.

The capital city has further room to ease housing restrictions, according to Chen Wenjing, a researcher at property agency China Index Holdings.

“Beijing hasn’t made major change to its rules about the number of properties a family is allowed to own,” Chen said. “While the current easing may spur some housing purchases in the short term, we expect further loosening to come.”

--With assistance from Jiyeun Lee.

(Updates with analyst comments in the sixth and last paragraphs, stock reaction in the seventh)