Mortgage terms eased to attract homebuyers and stanch a housing slump
A new property project in Shanghai's Zhenru subcenter of Putuo District.
Major Chinese cities like Shanghai and Beijing are trying to stimulate a slowing housing market by widening the definition of "first time homebuyers" to give more people access to preferential mortgages.
As of this weekend, homebuyers will be considered first-time buyers if they or any family members don't already own property in Shanghai and Beijing, regardless of their previous credit records.
The major cities of Guangzhou and Shenzhen in southern China announced similar changes earlier in the week.
The adjustments mean that more people will be classified as "first time homebuyers," giving them access to mortgages with lower interest rates and smaller down payments.
Xinhua news agency, quoting unidentified analysts, reported that the lowering of mortgage rates will benefit about 40 million borrowers nationwide.
In the past, having any history of a mortgage automatically categorized people as "second-time buyers," subject to tighter restrictions.
"The cost of loans and down payment requirements will significantly make homebuying more attractive," said Liao Feng, deputy general manager of Pacific Housing in Shanghai.
Take an 8 million yuan (US$1.1 million) property as an example. The down payment for a first-time buyer would be 2.8 million yuan, or 35 percent, compared with 5.6 million yuan, for a second-time buyer. The interest on the loan would be about 4.55 percent instead of around 5.25 percent.
Clearly, the new policy significantly lowers the threshold for buying a property in Shanghai, Liao said.
A high-end residential community in Shanghai's Pudong New Area.
Governments are anxious to sweeten the mortgage market because property and its associated sectors, such as home appliances and building materials, account for about a quarter of China's economy.
The property market has been in a slowdown, amid rising supply and falling prices. Nationwide, new-home sales fell by 5.3 percent in the first half of the year.
In Shanghai, sales of new homes, excluding government-subsidized affordable housing, have been below average at fewer than 5,000 units in the past two months, and transactions involving existing homes were less than 15,000 units for four consecutive months, according to the China Index Academy, a property research institute.
In the first half, supply of existing homes on the market in the city soared 82 percent, according to E-House China R&D Institute, a real estate think tank.
"The timing of the new policy announcements couldn't be more perfect and sends a very positive signal," Lu Wenxi, a senior researcher at Shanghai Centaline Property Consultants Co, told Shanghai Daily. "September and October are considered important windows for the real estate market in the second half of the year, often referred to as the 'gold and silver' months."
The new policy, Lu added, should stabilize the market or, at least, stanch a decline in housing prices.
Experts said families looking to upgrade their homes will be the most direct beneficiaries of the policy change, along with professionals from outside Shanghai.
A residential community in Shanghai's downtown.
Sha Wenjun, 30, a local resident, said she plans to take advantage of the new policy by selling two small apartments she owns in Pudong to buy a larger home to accommodate a growing family.
"The new policy will save a lot of money for me," she told Shanghai Daily. "Fluctuations in housing prices don't deter people like me, who sell homes to buy new ones. We only care about down payment requirements and interest rates."
An IT engineer surnamed Huang from neighboring Jiangsu Province said the policy gives him added impetus to settle in Shanghai.
"I'm more inclined to buy a house in Shanghai now," he said
Zhang Peipei, a real estate agent at property broker Ruijia, reported his office in Jing'an District witnessed a 50 percent increase in house viewings on Saturday.
"Potential buyers might consider borrowing an extra 1 to 2 million yuan under the new policy, which broadens their options," Zhang told shobserver.com, a local news outlet.
On the first day after Shanghai announced its adjusted policy, the number of people visiting real estate agencies increased.
A local agent based in Yangpu District also reported an uptick in buyer interest.
"Since the policy adjustments were released yesterday, the number of house viewings has increased, and about 2,000 existing houses were added to our listings," she said.
"Most of the interest comes from people who own homes outside of Shanghai."
She told Shanghai Daily there has been some increase in asking prices for homes, but it it's difficult to predict what impact the new policy will have on housing prices.
In Beijing's Shijingshan district, one property developer immediately announced an end to discounts on home sales, and a development project in Fangshan District displayed a poster online signaling a 1 percent price increase.
In other support measures, some Chinese state-owned banks are expected to lower interest rates on existing mortgages. That means if a homeowner can now take advantage of lower rates not available when a loan was first issued.
Chen, who lives in Shanghai's neighboring city of Hangzhou city, said he couldn't sleep the night after the new policies were announced. His mind was awash with the benefits he stands to gain.
Chen purchased an existing property in Hangzhou's Xiaoshan District in September 2021. His mortgage, as a first-home buyer, carried a rate of 6.1 percent.
Under the new policies, his interest rate will drop to 4.2 percent, resulting in a monthly mortgage reduction of 1,711 yuan and a total interest reduction of 410,000 yuan.
Two women peruse what's available in the property market at real estate agency in Shanghai.
Property has been a backbone of personal wealth in China, sometimes leading to rampant speculation. While the nation has tried to crack down on speculators, it is striving to preserve assets for ordinary homeowners by rolling out incentives to shore up confidence in the property market.
In effect, the minimum down payment nationwide for first-home purchases will be no less than 20 percent, while the rate for second-home purchases will be 30 percent – down from 30 percent and 40 percent previously.
"All of these changes mark the end of tight real estate policies that have been in place since 2017," said Yan Yuejin, director of the E-House institute.
