Chinese cities ease home purchase down-payments to reignite demand

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FILE PHOTO: Cars drive on the road during the morning rush hour in Beijing

BEIJING -A handful of Chinese cities are starting to relax down-payment rules for home purchases in a bid to re-ignite buyer interest and put a floor under local economies weakened by a regulatory crackdown on the indebted sector.

The eastern city of Heze is allowing some home buyers to pay lower down-payments for their purchases, two sources with direct knowledge of the matter said late on Thursday, among the first cities easing the borrowing rule.

Regulatory curbs on borrowing have driven China’s property sector – a major economic growth driver – into a sharp downturn, squeezing the cash-flow of many developers and chilling buyer sentiment.

For buyers with no mortgage history, the minimum down-payment ratio has been cut to 20% from 30%, while the ratio for buyers with one home has been lowered to 25%, with bank loans accounting for the rest of the payment, the sources said.

Local media reported that some banks had agreed to extend more loans in view of the lower down-payment ratio, in a move to help bolster demand.

“As far as I know, this is the first city cutting the down-payment ratio for mortgage loans,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “It signals policy easing in the property sector may have entered a new phase.”

The housing regulator of Heze, a city of 8.79 million in Shandong province, has not officially announced the move. It did not immediately respond to a Reuters request for comment.

First-time home-buyers in the southwestern city of Chongqing and Ganzhou city in southern Jiangxi province are also being allowed 20% down-payment ratios, according to the state-backed Shanghai Securities Journal.

The down-payment ratio cuts are in cities which have not implemented curbs on home purchases, the Journal said.


Since late 2021, several cities have taken measures to bolster local property markets such as increasing mortgage loans, lowering mortgage rates and providing subsidies for home purchases.

Earlier this month, China also moved to give real estate firms easier access to presale proceeds from residential projects in escrow accounts, to alleviate their funding stress.

The easing measures came ahead of China’s annual parliamentary meeting as well as the gathering of the largely ceremonial advisory body, the Chinese People’s Political Consultative Conference, in March.

“After the Two Sessions in early March, we think more local governments (especially higher-tier cities) will roll out demand-side easing,” said JP Morgan in a note.

Developers listed in mainland China and Hong Kong rose on Friday, with the CSI 300 Real Estate Index and the Hang Seng Mainland Properties Index each up around 2% in early afternoon trade.

(Reporting by Shuyan Wang, Liangping Gao, Jason Xue and Ryan Woo; Editing by Richard Pullin and Kenneth Maxwell)