Published: Friday, May 17, 2020
China announced Friday a series of new measures to revive its struggling property industry, after the latest figures showed that housing prices had fallen by nearly 10% since January.
The central bank announced that it would, among other things reduce the down payment on mortgages and remove a floor for interest rates on first and second home purchases.
China’s housing sector has fallen after several years of crackdowns on property developers who had borrowed excessively. This led to a slowdown in growth for the No. 2 economy, which also affected other industries, such as construction, home furnishings, and appliances. 2 economy.
Decades of developers whose high-rise apartment buildings have changed the urban landscapes in China have defaulted on debts. Unfinished projects are a common occurrence.
He Lifeng, vice premier of the province, said that officials would develop policies for each city, and “fight the hard battle” of addressing the risks of unfinished commercial homes.
He told a high-level teleconference about property policies that “we will advance solidly key tasks, such as housing delivery guaranteed and absorption existing commercial housing.” The official Xinhua News Agency cited He’s words.
After earlier efforts such as interest rates cuts and government-backed funding failed to attract buyers to the market, at a moment when developers are struggling with delivering housing that has already been promised and paid for, there is a renewed effort to encourage more families to purchase homes.
Due to the low interest rates charged by banks, housing is an important investment for Chinese. Many potential buyers may be waiting until the market reaches its bottom before making new purchases. Many people are also wary about spending because of the effects of the pandemic, including layoffs.
According to the announcement made by the People’s Bank of China, effective Saturday the interest rate on first-time loans from the Housing Provident Fund for less than 5 years would be reduced by 0.25 percentage points. Rates for loans longer than 5 years were reduced by 0.25 percent to 2.85%.
The minimum down payment for first-time home buyers will be 15%. It said that for second homes it would be 25%.
In a recent report, Chen Wenjing, of China Index Holdings a Nasdaq listed company that specializes in real estate information in China, stated that the latest efforts show Chinese leaders’ determination to stabilize the market.
Chen stated that lowering the threshold for down payments and reducing home purchase costs will increase residents’ willingness to buy homes. He said that if major cities adopt similar measures, it will improve the market’s sentiment.
Dong Jianguo said that officials should ensure home buyers receive what they paid for. If this is not possible, the courts might be required to intervene.
Dong said at a press conference in Beijing that protecting the legitimate interests and rights of homebuyers was also a priority.
Officials of the National Bureau of Statistics admitted earlier Friday that domestic demand – spending by consumers and business – remained “insufficient.” They also said the government is considering ways to revive the property market after housing prices fell 9.8% between January and April compared with a year ago.
“The complexity, severity and uncertainty of the external environment have increased significantly.” Liu Aihua is a bureau spokesperson. She said that there was a lack of effective domestic demand. There were also high business pressures, hidden dangers, and a high level of risk.
Liu stated that “the foundation for recovery must be strengthened”.
Local governments are implementing a key strategy that involves buying apartments that were not sold due to a weak demand. These apartments will be rented as affordable housing under trial programs that seem to have been adopted into national policy.
The central bank announced that as part of its latest policy relief it will set up a fund of 300 billion yuan (42 billion dollars) to finance the purchase of unoccupied housing for affordable housing by local governments and state-run companies.
China’s economy has grown at a solid 5.3% in the first three months of this year. However, that rate is still relatively slow for an economy in development, and there are signs of weakness.
According to a report released by the National Bureau of Statistics on Friday, factory output increased 6.7% from April of last year and investments in fixed assets like factory equipment rose 4.2%.
Housing starts have fallen by almost 25% and sales, measured in terms of floor area, are down by 20%. Finance for property projects dropped by 25%.
Retail sales in April rose by only 2.3%.
Officials expect a rebound in demand as the government implements policies to encourage households to buy new cars and appliances.
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This report was contributed by Yu Bing, Wanqing Chen and Yu Bing from Associated Press in Beijing.
Source: ABC News