Shanghai Eases Homebuying Rules As China Extends Support
(Bloomberg) -- China’s financial hub of Shanghai eased rules for homebuyers, the first top city to follow through on the central government’s latest aid for the embattled property sector.
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The city will make it easier for those without local household registration to purchase homes in suburban areas by shortening the number of years they need to pay social security or individual tax to one year from three years previously, according to a statement late Sunday. Those who’ve paid social security or tax for three years will be allowed to purchase the same number of properties as local residents — a move that will let them buy at least two homes, compared with just one earlier.
Shanghai also reduced downpayment ratios to a minimum of 15% for first-time buyers from 20% previously. Those buying second homes in the city center will need to make a minimum downpayment of 25%, while rates for homes outside those areas will be cut to 20%, down from 30% previously. The rules will take effect from Oct. 1, according to the statement.
The central bank on Sunday also announced that it will allow refinancing of mortgages. The move, confirming earlier reports by Bloomberg News, underscores China’s urgency to stem a housing-led slowdown in Asia’s largest economy as it faces the prospect of increasing protectionism and a shaky global outlook.
China in late September unveiled its biggest package yet to shore up its beleaguered property market, lowering borrowing costs on as much as $5.3 trillion in mortgages and easing down-payment requirements for second-home purchases to a historical low.
Top leaders also pledged action to make the real estate market “stop declining,” their strongest vow yet to stabilize the sector after new-home prices fell in August at the fastest pace since 2014. The central government directive, including encouraging cities to modify home-buying restrictions, paved the way for China’s biggest cities to roll out easing.
Homeowners will be able to renegotiate terms with their current lenders effective Nov. 1, the People’s Bank of China said Sunday. Those who chose fixed mortgage rates can also renegotiate new loans based on the latest loan prime rate, a reference rate for mortgage loans, according to the statement.
The measures will slash outstanding rates for individual borrowers by an average of 50 basis points, and reduce their annual interest expenses by about 150 billion yuan ($21 billion), PBOC Governor Pan Gongsheng said earlier in September. Banks usually reprice existing loans at the beginning of the year based on the five-year loan prime rate, which has been lowered by 35 basis points.
China will allow mortgage refinancing for both first and second homes, according to a separate statement by the nation’s interest rate self-disciplinary body overseen by the central bank. The inclusion of second-home buyers for mortgage refinancing marks an expansion from a similar drive a year earlier, which applied to first-home purchasers only.
Last year’s mortgage refinancing push reduced outstanding rates by an average of 73 basis points and lowered borrowers’ annual interest expenses by about 170 billion yuan, the PBOC said in a July report.
Major banks should announce detailed rules no later than Oct. 12 and complete the mortgage refinancing before Oct. 31. State-owned lenders including Industrial & Commercial Bank of China Ltd., Bank of China Ltd., Bank of Communications Co. and Agricultural Bank of China Ltd. all announced their rules immediately after the PBOC’s statement.
(Updates with details from PBOC statement. An earlier version was corrected to specify which individuals can buy more than one home.)
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