Some Chinese Developers Cut Down Payments, Business News Says

Some Chinese developers are allowing first-time homebuyers to delay their down payments to boost sales, China Business News reported today, citing unidentified agents.

Developers in cities including Nanjing, Shenzhen, Guangzhou and Wuhan sold some projects with a 10 percent down payment, the newspaper reported. The sellers advanced the remaining 20 percent, which buyers don’t have to pay back for as long as three years in some cases, the newspaper said, citing agents and sales people it didn’t identify. First-home buyers in China need to pay a minimum 30 percent down payment.

The marketing strategy, used by some developers in 2008, gained popularity recently as housing inventories grew, according to AJ Securities Co. China’s January home prices recorded their worst performance in at least a year, with none of the 70 cities monitored by the government posting gains as Premier Wen Jiabao reiterated his determination to maintain property curbs.

“Developers have fairly strong needs to boost sales under this environment,” said Zuo Hongying, a Shanghai-based analyst at AJ Securities, adding that the practice “won’t become too widespread” as delaying down payments in effect increases leverage and risk.

China has since 2010 battled rising home prices with measures including higher down payments and mortgage rates, as well as home purchase restrictions in more than 40 cities.

--Zhang Dingmin. Editors: Linus Chua, Andreea Papuc

To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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