China megacities ease homebuying rules to boost property market

China’s teetering real estate market long accounted for around a quarter of its economy and experienced dazzling growth for two decades – Copyright AFP Hector RETAMAL

Isabel Kua with Luna Lin

Three Chinese megacities on Monday eased restrictions on buying homes and Beijing’s central bank said it would ask financial institutions to lower mortgage rates, as the country seeks to pull itself out of a housing slump.

The measures are the latest in a raft of pledges out of Beijing since last week aimed at kickstarting the world’s number two economy.

The teetering property sector has long accounted for around a quarter of gross domestic product and experienced dazzling growth for two decades.

But a years-long housing slump has become a major impediment to growth as the country’s leadership eyes a target of around five percent this year — an objective analysts say is optimistic given the many headwinds the economy faces.

Late on Sunday, three of the country’s biggest cities said they would make it easier for people to buy homes in measures that would come into effect on September 30.

The southern megacity of Guangzhou — home to more than 14 million people — said potential homebuyers would no longer have their “qualification for purchasing homes” reviewed, state news agency Xinhua said.

There will also be “no restrictions” on how many homes a person can buy, it added.

The nearby city of Shenzhen also eased some purchasing restrictions, with buyers no longer subject to “review of their home purchase qualifications”, local media citing authorities said.

And in the eastern economic powerhouse of Shanghai — the country’s richest city — authorities said they would reduce the tax burden on some homebuyers and lower down payments on homes.

The swath of announcements came as China’s central bank said Sunday it would ask financial institutions to cut interest rates on existing home loans in a bid to “lower financial burdens on property owners”, Xinhua said.

Yan Yuejin, deputy director of E-house China R&D Institute in Shanghai, told AFP the moves were driven by “pressure” in the property market.

“Fewer people are buying property these days,” he said.

Getting the property market moving again, Yan said, was key to boosting lagging domestic consumption — another major drag on growth.

China’s leadership last week unveiled a raft of measures to boost the economy in one of its biggest drives in years to kickstart growth.

– Looming ‘macro challenge’ –

But they also warned the economy was being plagued by “new problems”.

Markets have rallied in Hong Kong and mainland China on the announcements amid hopes of greater support. 

On Monday, property developers were among the big winners, with Kaisa rocketing almost 60 percent, Sunac up more than 16 percent and Fantasia piling on more than 30 percent.

However, analysts warned the “bazooka” stimulus was likely still not enough to boost the property market and one was sceptical that Monday’s new measures would do much to help. 

“From a macro perspective these policies are not that important, as these cities account for a small share of the national property market,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.

“The key policy to address the macro challenge remains… fiscal,” he said.

Highlighting the uphill task for the government, official data showed Monday that manufacturing contracted for a fifth consecutive month in September.

The Purchasing Managers’ Index — a key barometer of industrial output — stood at 49.8 points, the National Bureau of Statistics announced.

Still, it does represent a slight improvement from August’s 49.1 points and above the 49.5 forecast in  a survey by Bloomberg.

A figure above 50 indicates an expansion in manufacturing activity, while below that is a contraction.