Beijing, Shanghai Lower Down Payment Ratio, Mortgage Rates for Home Buyers

Beijing, Shanghai Lower Down Payment Ratio, Mortgage Rates for Home Buyers

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(Yicai) Dec. 15 — Beijing and Shanghai, two Chinese first-tier cities, have lowered their down payment ratio and mortgage rates for home buyers.

Beijing yesterday cut the down payment ratio for first-time house buyers to 30 percent from 35 percent and the loan rates in downtown and suburban areas by 45 basis points and 55 bps to 4.3 percent and 4.2 percent, respectively. China’s capital city also extended the maximum loan term to 30 years from 25 years.

Moreover, Beijing slashed the minimum down payment ratio for second-time home buyers in downtown areas to 50 percent, with a loan rate of 4.8 percent, and that for second-time home buyers in suburban areas to 40 percent, with a loan rate of 4.75 percent.

Shanghai unveiled similar easing policies yesterday. The eastern Chinese megacity trimmed the minimum down payment ratio and the loan rate for first-time home buyers to 30 percent from 35 percent and to 4.1 percent from 4.55 percent, respectively. It also adjusted its loan policy for second-time house buyers.

The above loan rates are calculated based on the loan prime rate issued by the People’s Bank of China, which is 4.2 percent now.

Along with the previous real estate policies, these new ones increase home buyers’ capacity to pay, which will likely release demand and encourage more people to buy, Chen Xiaotian, chairman of Yihan Business Consulting, told Yicai.

The market has been waiting for a long time for first-tier cities to ease house purchasing policies, said Guan Rongxue, senior analyst at Zhuge Data Research Center. Beijing and Shanghai issuing new policies is a great positive signal to the market, Guan added, noting that first-tier cities are key for the real estate market, so their easing policies will play a leading role in the whole Chinese real estate market.

China released many new policies to boost the real estate market in the second half of the year. For example, the PBOC lowered the interest rate on existing mortgages, and Beijing and Shanghai adjusted the criteria to define first homes, allowing people who have extinguished their loans on first homes but do not own one to request another mortgage with first-home terms.

New home transactions in China fell, while second-hand home transactions rose in the first 11 months of the year, indicating that the demand for buying houses did not drop, but changed structure, Dong Jianguo, vice minister of housing and urban-rural development, said at the China Economics Annual Conference on Dec. 13.

Editors: Dou Shicong, Futura Costaglione

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