Two of China’s biggest and most expensive cities have relaxed regulations on home purchases, allowing more people to qualify for favorable mortgage terms for their first homes as a protracted property crisis continues to weigh on the world’s second-largest economy.
The southern business hubs of Guangzhou and Shenzhen on Wednesday became the latest cities to take steps to boost property demand, giving more people access to preferential mortgage rates and downpayment requirements regardless of their credit records if they don’t have housing registered under their name.
The moves come after the central government last week widened the definition of first-home home buyers as part of its efforts to revive the ailing property sector. Last month, China’s housing minister, Ni Hong, urged other authorities to enact property-market easing measures, including reducing mortgage rates and downpayment ratios for first-time home buyers.
Other Chinese megacities, including Beijing and Shanghai, are widely expected to follow suit, and smaller cities have already taken various steps to attract home buyers.
Since last winter, Beijing has rolled out a cascade of rescue policies to support the beleaguered property sector, which accounts for roughly a quarter of China’s economy. The measures have so far been unable to engineer a real-estate revival, with leading developer Country Garden Holdings
fueling contagion fears after missing interest payments on some of its bonds earlier this month.
On Wednesday, Country Garden warned of default risks and reported a loss of 48.93 billion yuan ($6.72 billion) for the first half of the year.
“Although the company had already anticipated the market adjustment in the industry cycle, the profundity and persistence of the market’s downtrend still caught the company off guard,” it said in a filing.
Economists say the latest housing support push won’t be enough to boost housing demand and may be a case of “too little, too late.”
Official data shows that home sales by value rose 0.7% from a year earlier in the January-to-July period, slowing significantly from the 3.7% increase marked in the first six months of the year. Property investment fell 8.5% during the period, compared with the 7.9% decline recorded in the first six months. New construction starts plunged 24.5%.
The country’s largest banks are preparing to cut interest rates on existing mortgages and the reductions will only affect loans on first homes, Bloomberg reported earlier this week, citing people familiar with the matter.