"Revive Real Estate" Beijing and Shanghai Ease Housing Purchase Restrictions

Housing Deposit Lowered Side by Side... Mortgage Loan Standards Also Eased

The capital of China, Beijing, and its economic hub, Shanghai, have eased housing purchase restrictions to revive the real estate market.

[Image source=AP Yonhap News]

According to Bloomberg and other sources on the 14th, Beijing announced that it will lower the down payment ratio for first-time homebuyers from the previous 35-40% of the house price to 30%.

Additionally, the down payment ratio for second home purchases will be reduced to 50% in six central urban districts and 40% in non-central districts. Currently, depending on the district and house size, the down payment ratio reaches 60% or even 80%.

At the same time, Beijing relaxed the regulations on so-called 'bihohwa housing (general housing)' for the first time since 2014, allowing more residents to obtain mortgage loans.

Not only Beijing, but Shanghai also reportedly lowered the down payment ratios for first-time and second-time homebuyers to 30% and 50% of the house price, respectively, according to state media.

Lowering the housing purchase down payment reduces the initial capital required for buyers, effectively lowering the entry barrier to the real estate market. This move is interpreted as an effort to address the downturn in China's real estate market, which has been declining since the second half of 2020 due to government regulations aimed at curbing speculation.

With the real estate market, which accounts for about 25% of China's gross domestic product (GDP), in recession, economic difficulties are intensifying. As local governments face severe fiscal distress due to a decline in state-owned land use rights sales, authorities have been rolling out measures to revitalize the real estate sector one after another.

However, it remains uncertain whether the government's policies will have a substantial effect amid the slowdown of the Chinese economy. Bloomberg pointed out that "buyers are maintaining a wait-and-see attitude, shocked by construction delays, price drops, and defaults by real estate developers."