The central Chinese city of Zhengzhou has moved to relax purchase curbs on second homes – the first city in the country to do so – to bolster buyer sentiment and boost sales of residential property.
Banks in Zhengzhou, capital of Henan province, have cut the down-payment ratio for buyers that already own one home and have no outstanding mortgage to 30% from 60% when they purchase their second home, the city’s government said in a statement on Tuesday.
China’s property market, a pillar of the world’s second-largest economy, has gained some momentum in recent weeks after local authorities in many parts of the country took measures to assuage buyer sentiment hit by capital-starved developers.
The measures include cuts in down-payments for first-time buyers, reductions in mortgage rates, subsidies, and allowing real estate firms easier access to presale funds held in escrowed accounts.
Sharp Fall in Prices ‘Not Wanted’
Meanwhile, Guo Shuqing, chairman of the banking and insurance regulator, said on Wednesday China does not want to see sharp adjustments in property prices as they would hurt its economy.
Some adjustments in prices were good for the financial sector, however, he added, and the trend of property bubbles in China had been reversed.
Zhengzhou was the first second-tier city, administratively one step below mega-cities such as Beijing and Shanghai, to “rescue” its market after the Lunar New Year, according to China Real Estate Information Corp (CRIC), an independent provider of property information and consultancy services.
In January, before the start of the Lunar New Year, home transactions by floor area in Zhengzhou’s downtown area plunged 45% from a month earlier, according to CRIC data.
“Among the second-tier cities, at least more than 20 provincial capitals have the possibility of relaxation,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution, including the southwestern city of Kunming and southern city of Nanning.
In Zhengzhou, as of the end of 2021, 274 projects involving 25,249 units saw either a suspension in construction or a delay in completion, data from CRIC show.
Zhengzhou, a city of 12.6 million people, has already taken other measures to support its residential property market, such as lowering mortgage rates and providing subsidies for college graduates and seniors to purchase homes, according to the city government’s statement.
China’s property market is expected to stay soft in the first half of 2022 before rebounding later in the year as policies aimed at encouraging buyers help improve sentiment, a Reuters poll showed last week.
• Reuters with additional editing by Jim Pollard
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