In a bid to revitalize its flagging property sector, China announced a series of measures on Monday (September 30) aimed at easing home-buying restrictions in three of its largest cities, reports Japan Today. The move comes as Beijing’s central bank signalled its intention to request financial institutions to lower mortgage rates, part of a broader effort to pull the country out of a prolonged housing slump.
These initiatives are the latest in a string of policy announcements from Beijing over the past week, all geared towards jumpstarting the world’s second-largest economy. The property sector, which has long been a cornerstone of China’s economic growth, accounting for approximately a quarter of its gross domestic product, has been experiencing a prolonged downturn after two decades of explosive growth.
The housing market’s decline has become a significant obstacle to China’s economic growth, threatening the leadership’s target of around five per cent growth this year – a goal that analysts consider ambitious given the numerous challenges facing the economy.
Plans to simplify home-buying
Late Sunday, three of China’s most prominent cities announced plans to simplify the home-buying process, with new measures set to take effect on September 30. Guangzhou, a southern megacity of over 14 million people, will no longer require potential homebuyers to undergo a “qualification for purchasing homes” review, according to state news agency Xinhua. The city will also remove restrictions on the number of homes an individual can purchase.
Similarly, Shenzhen, another major southern city, will ease purchasing restrictions by eliminating the review of home purchase qualifications. Shanghai, China’s wealthiest city and eastern economic powerhouse, plans to reduce the tax burden on certain homebuyers and lower down payments on homes.
Concurrent with these city-level announcements, China’s central bank stated on Sunday that it would instruct financial institutions to reduce interest rates on existing home loans, aiming to “lower financial burdens on property owners,” as reported by Xinhua.
Need to revitalize property market
Yan Yuejin, deputy director of E-house China R&D Institute in Shanghai, attributed these moves to mounting “pressure” in the property market, noting a decline in property purchases. He emphasized that revitalizing the property market is crucial for stimulating lagging domestic consumption, another significant drag on economic growth.
Last week, Chinese leadership unveiled a comprehensive package of measures to stimulate the economy, marking one of its most substantial efforts in years to spur growth. However, they also acknowledged that the economy faces “new problems.”
While these announcements have sparked rallies in Hong Kong and mainland China markets, with property developers seeing significant gains, some analysts remain cautious. Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, suggested that these policies may have limited impact on the national property market due to the relatively small share these cities represent.
As China continues to grapple with economic challenges, official data released on Monday showed that manufacturing contracted for the fifth consecutive month in September, underscoring the ongoing difficulties facing the country’s economy despite these new stimulus measures.