China on Friday announced a series of new measures to boost its sluggish real estate industry after the latest data showed house prices have fallen nearly 10% since the start of the year.
The central bank announced, among other things, that it would lower the minimum down payment for home loans and eliminate floor caps on interest rates for first and second homes.
China's housing market has slumped after a crackdown on excessive borrowing by property developers several years ago, holding back a wide range of other businesses including furniture, appliances and construction, slowing growth in the world's second-largest economy. .
Dozens of developers owning high-rise apartment complexes that have transformed the urban landscape across China have defaulted on their debts. Many projects remain unfinished and stalled.
Deputy Prime Minister He Lifeng said authorities will develop policies tailored to each city and “fight a tough battle to address the risks of unfinished commercial housing.”
“We will firmly advance important issues such as guaranteeing housing supply and absorbing existing commercial housing,” he said during a top-level conference call on real estate policy, state news agency Xinhua reported.
The increase comes after previous measures such as interest rate cuts and government-backed loans failed to attract buyers to the market, as developers struggle to deliver homes already promised and paid for. Efforts to encourage more families to buy homes are gaining momentum.
Low bank interest rates have made housing a mainstay of investment for Chinese people, and many prospective buyers may be waiting for the market to bottom out before considering a new purchase. Layoffs and other disruptions caused by the pandemic have also made many people cautious about spending.
The People's Bank of China announced that starting Saturday, the interest rate on first-time loans of housing provident funds for less than five years will be cut by 0.25 percentage points to 2.35%. Interest rates on loans over five years have been lowered by 0.25 percentage points to 2.85%.
The minimum down payment for a first mortgage is 15% of the purchase price. For second homes, the rate is 25%.
Earlier on Friday, Office for National Statistics officials admitted that domestic demand – spending by consumers and businesses – remained “inadequate”, with house prices falling 9.8% in the January-April period compared to a year earlier. In response, the government said it is considering further ways to revitalize the real estate industry. one year ago.
“The current external environment has significantly increased complexity, harshness and uncertainty. There is insufficient effective domestic demand, business pressures are high, and there are many risks and hidden dangers,” the agency said. Spokesperson Liu Aihua said.
“We need to strengthen the foundations of recovery,” Liu said.
China's cabinet, the State Council, was scheduled to hold a press conference later Friday focused on the real estate industry.
One key strategy being rolled out is for local governments to buy up unsold apartments due to weak demand and rent them out as affordable housing in a pilot program that appears to have become a national policy.
Economic news outlet Caixin reported that the Ministry of Housing, the central bank, other government agencies and state-owned banks are establishing a joint task force to brainstorm ways to revitalize the industry.
Although China's economy posted a solid 5.3% growth rate in the first quarter of this year, it is relatively slow for a developing country and signs of weakness continue.
Factory output rose 6.7% in April compared to the same month last year, and investment in fixed assets such as factory equipment rose 4.2%, according to a report released Friday by the National Bureau of Statistics.
However, housing starts were down about 25% from a year earlier, and sales, as measured by floor space, were down 20%. Loans for real estate projects fell by 25%.
Retail sales rose only 2.3% in April.
Officials said they expected demand to recover as the government implemented policies aimed at encouraging households to sell old cars and appliances and buy new ones.
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Associated Press researchers Yu Bing and Wanqing Chen in Beijing contributed to this report.
