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China loosens home down payment requirement

Updated: Feb 2,2016 5:39 PM     Xinhua

China announced on Feb 2 it would lower the minimum deposit for home purchases in most cities, to spur the real estate market.

The People’s Bank of China (PBOC), the central bank, said that in cities where there was no home purchase restrictions, down payments for first homes financed by loans from commercial banks will stay at a minimum of 25 percent “in principle,” but they can go down as much as 5 percentage points.

For those who want to buy a second home with commercial loans but have outstanding loans on their first property, the down payment requirement will be cut to no less than 30 percent from the current 40 percent.

The PBOC said that local governments of those cities can decide on the exact deposit requirement “according to their own conditions,” under the guidance of the PBOC and the China Banking Regulatory Commission.

In cities where home purchase restrictions still apply, old down payment rules will remain effective, the PBOC said.

Beijing, Shanghai, Guangzhou, Shenzhen and Sanya are the remaining five cities with restrictions on home purchases, which were introduced in 2010 to rein in house prices.

The move, the second adjustment in four months, is intended to “support reasonable consumption of housing” and promote the stable and healthy development of the market, the central bank and the banking regulator said in a joint statement.

In September, the minimum down payment for first home buyers was lowered to 25 percent from the previous 30 percent in cities that did not have restrictions on purchases.

Zhu Zhenxin, an analyst with Minsheng Securities, said minimum down payment levels could be lowered further and more supportive policies might be unveiled for the property sector in the next two or three years.

China’s property market took a downturn in 2014 due to weak demand and a supply glut. This cooling continued into 2015, with sales and prices falling, and investment slowing, which dented activity in sectors ranging from steel, cement, furniture to home appliances.

The country has made de-stocking its massive property inventory one of this year’s major economic tasks, over concerns that the ailing housing market could derail the economy, which registered its weakest growth rate in a quarter of a century.