China Cuts Minimum Home Down Payment for First-Time Buyers

Updated on
  • PBOC lowers required mortgage deposit to 25% from 30%
  • New-home prices rose in 35 of 70 cities in August, up from 31

China’s central bank cut the minimum home down payment required of first-time buyers for the first time in five years, stepping up support for the property market after five interest-rate reductions since November failed to reverse an economic slowdown.

The People’s Bank of China cut the minimum down payment for buyers in cities without purchase restrictions to 25 percent from 30 percent, according to a statement released on its website Wednesday. The previous requirement had been in place since 2010, when the government boosted the ratio from 20 percent to help curb property speculation.

The move extends a year of loosening in the property market as Premier Li Keqiang seeks to boost demand in the world’s second-largest economy after fiscal and monetary stimulus produced few signs of a rebound. Growth will slow to 6.8 percent this year, according to the median of economist estimates compiled by Bloomberg. That’s below the government’s target for an expansion of about 7 percent.

“Amid China’s economic slowdown, property’s role as a growth pillar has become even more important, and the government clearly sees it,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “It’s one policy that’s part of a grand strategy to revive property investment and the whole national economy.”

While property investment has remained weak, home sales have recovered after mortgage policy easing and removal of purchase restrictions helped support demand. New-home prices rose in 35 of 70 cities in August, up from 31 in July and just two cities in February.

UBS Group AG has estimated the real-estate industry accounts for more than a quarter of final demand in the economy when including property-related goods including electric machinery and instruments, chemicals and metals.

The government also has urged some cities to allow citizens to borrow more from housing funds to help buyers, and encouraged cities to securitize more of those loans, according to a statement on the housing ministry’s website.

— With assistance by Dingmin Zhang, and Xin Zhou

(Updates to add housing ministry statement in last paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE