(Bloomberg) — Three of China’s largest cities eased rules for homebuyers, following through on the central government’s latest efforts to prop up the embattled property sector.
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Trading hub Guangzhou became the first tier-1 city to remove all restrictions, saying it will stop reviewing homebuyer eligibility and no longer limit the number of homes owned, according to a statement late Sunday. Both Shanghai and Shenzhen said they will allow more people to purchase residences in suburban areas, as well as allow others to buy more homes.
Shanghai, China’s financial hub, and Shenzhen, the southern city known for its tech industry, also announced they were lowering minimum downpayment ratios for first and second homes to 15% and 20%, respectively, in a bid to boost demand.
China in late September unveiled its biggest package yet to shore up its beleaguered property market, lowering borrowing costs on as much as $5.3 trillion in mortgages and easing down-payment requirements for second-home purchases to a historical low. Top leaders also pledged action to make the real estate market “stop declining,” their strongest vow yet to stabilize the sector after new-home prices fell in August at the fastest pace since 2014. The central government directive, including encouraging cities to modify home-buying restrictions, paved the way for China’s biggest cities to roll out easing.
The central bank on Sunday also announced that it will allow refinancing of mortgages. The move, confirming earlier reports by Bloomberg News, underscores China’s urgency to stem a housing-led slowdown in Asia’s largest economy as it faces the prospect of increasing protectionism and a shaky global outlook.
Homeowners will be able to renegotiate terms with their current lenders effective Nov. 1, the People’s Bank of China said Sunday. Those who chose fixed mortgage rates can also renegotiate new loans based on the latest loan prime rate, a reference rate for mortgage loans, according to the statement.
The measures will slash outstanding rates for individual borrowers by an average of 50 basis points, and reduce their annual interest expenses by about 150 billion yuan ($21 billion), PBOC Governor Pan Gongsheng said earlier in September. Banks usually reprice existing loans at the beginning of the year based on the five-year loan prime rate, which has been lowered by 35 basis points.
China will allow mortgage refinancing for both first and second homes, according to a separate statement by the nation’s interest rate self-disciplinary body overseen by the central bank. The inclusion of second-home buyers for mortgage refinancing marks an expansion from a similar drive a year earlier, which applied to first-home purchasers only.
Last year’s mortgage refinancing push reduced outstanding rates by an average of 73 basis points and lowered borrowers’ annual interest expenses by about 170 billion yuan, the PBOC said in a July report.
Major banks should announce detailed rules no later than Oct. 12 and complete the mortgage refinancing before Oct. 31. State-owned lenders including Industrial & Commercial Bank of China Ltd., Bank of China Ltd., Bank of Communications Co. and Agricultural Bank of China Ltd. all announced their rules immediately after the PBOC’s statement.
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