China announced a slate of fresh measures Friday to reinvigorate its ailing property industry after the latest data showed housing prices have slumped nearly 10% since the start of the year.
Among other things, the central bank said it would reduce the minimum down payment for mortgages and remove the floor on interest rates for first and second homes.
China’s housing market has slumped after a crackdown on excessive borrowing by property developers several years ago, dragging along a wide range of other businesses — such as home furnishing, appliances and construction — and slowing growth in the world’s No. 2 economy.
Dozens of developers, whose legions of high-rise apartments have transformed urban landscapes across China, have defaulted on their debts. Many projects have just stalled, unfinished.
He Lifeng, a vice premier, said officials would roll out policies to suit each city and “fight the tough battle of dealing with the risk of unfinished commercial housing.”
“We will solidly advance key tasks such as guaranteed housing delivery and absorption of existing commercial housing,” the official Xinhua News Agency cited He as telling a top level teleconference on property policies.
The effort to entice more families to buy homes has gained momentum after earlier moves such as interest rate cuts and government-backed financing failed to lure buyers into the market at a time when developers are struggling to deliver housing already promised and paid for.
Housing is a mainstay of investment for Chinese, given the low level of interest rates paid by banks, and many potential buyers might be waiting for the market to bottom out before considering new purchases. Also, layoffs and other disruptions from the pandemic have left many people wary of spending.
The announcement by the People’s Bank of China said that effective Saturday, the interest rate for first-time housing provident fund loans for under 5 years will be cut by 0.25 percentage point to 2.35%. The rate for loans over 5 years was reduced by 0.25 percentage point to 2.85%.
Minimum down payments for loans for first homes will be 15% of the purchasing price. For second homes, it will be 25%, it said.
Earlier Friday, officials of the National Bureau of Statistics acknowledged that domestic demand — spending by consumers and businesses — remained “insufficient” and said the government was considering further ways to revitalize the property industry after housing prices sank 9.8% in January-April from a year earlier.
“The complexity, severity, and uncertainty of the current external environment are significantly increasing. There is insufficient effective domestic demand, high business pressure, and many risks and hidden dangers,” said Liu Aihua, a spokesperson for the bureau.
“The foundation for recovery needs to be strengthened,” Liu said.
The State Council, China’s Cabinet, was due to hold a news conference later Friday focusing on the property industry.
One of the key strategies being rolled out involves local governments buying apartments that have going unsold due to weak demand, to be rented out as affordable housing in trial programs that appear to have become national policy.
The financial news outlet Caixin reported that the housing ministry, the central bank, other government agencies and state-owned banks were setting up a joint task force to brainstorm ways to revitalize the industry.
China’s economy grew at a robust 5.3% rate in the first quarter of this year, but that is relatively slow for a developing economy, and signs of weakness have persisted.
The report Friday by the National Bureau of Statistics showed factory output was up 6.7% in April from a year earlier and investment in fixed assets such as factory equipment climbed 4.2%.
But housing starts fell almost 25% year-on-year and sales as measured by floor area were down 20%. Financing for property projects fell 25%.
Retail sales rose only 2.3% in April.
Officials said they expected demand to rebound as the government carries out policies aimed at getting households to sell off old cars and appliances and buy new ones.
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Associated Press researchers Yu Bing and Wanqing Chen in Beijing contributed to this report.
