China has announced new measures to revive its struggling property industry, as housing prices have dropped nearly 10% since the beginning of the year. The central bank plans to reduce the minimum down payment for mortgages and eliminate the floor on interest rates for first and second homes. The housing market decline began after a crackdown on excessive borrowing by developers and has affected various related industries, slowing growth in the economy. Many developers have defaulted on debts, leading to stalled projects across the country.
Efforts to encourage families to purchase homes have intensified, following previous measures like interest rate cuts and government financing that did not attract buyers. With low bank interest rates, housing is a popular investment for Chinese citizens, but the market downturn and economic disruptions from the pandemic have deterred potential buyers. The People’s Bank of China has announced interest rate cuts for housing provident fund loans, as well as reduced minimum down payments for first and second homes, aiming to stabilize the real estate market and boost homebuyers’ willingness to make purchases.
Chinese leaders are determined to stabilize the real estate market by implementing historic lows in down payment levels and mortgage interest rates. The move is expected to improve market sentiment and increase home buying activity, especially if major cities follow up with related measures. Government officials are advised to prioritize protecting the rights of home buyers in judicial proceedings, particularly when developers fail to deliver promised housing. Local governments are also considering purchasing unsold apartments to be rented out as affordable housing, as part of efforts to revitalize the property industry.
Despite a 5.3% economic growth rate in the first quarter, signs of weakness persist in China, with sluggish demand and declining property sales. The National Bureau of Statistics acknowledges the need for further measures to strengthen economic recovery and address business pressure. Local governments are being urged to buy unoccupied housing for use as affordable housing, with the central bank establishing a fund to finance these purchases. As officials expect demand to rebound with policies encouraging households to replace old cars and appliances with new ones, the focus remains on revitalizing the property industry and boosting overall economic growth.
