Shandong’s Jiaozhou City in Qingdao once again lowers the threshold for home buying, with down payment ratio reduced to 7.5%. Experts and the public alike believe that this will lead to transaction risks and also indicate that low-tier cities are starting to panic amidst the real estate market crisis. Netizens sarcastically comment that the noose for hanging has been lengthened once again.
On June 6th, Jiaozhou City in Shandong released multiple incentive policies and measures including housing ticket resettlement, home buying subsidies, collective purchasing of commercial housing, and talent housing with shared ownership. Participation in the collective purchase of commercial housing comes with various favorable policies.
First, there is a guarantee of the lowest price for the year, ensuring that the pool of collective purchase housing is priced at the lowest market rate for the year 2024, and also the lowest price for six months after online signing.
Secondly, on this basis, efforts are made to have developers provide an additional 5% to 10% discount.
Thirdly, for families purchasing their first home and facing relatively difficult financial situations, the down payment can be paid at 50% (according to the national standard ratio), with the remaining 50% allowed to be paid in installments over 1 to 2 years. This means that Jiaozhou’s policy further reduces the minimum down payment ratio to 7.5% based on the 15% down payment ratio for first-time homebuyers.
Yan Yuejin, director of the E-house Research Institute, believes that Jiaozhou City’s introduction of the lowest down payment ratio in the country to a certain extent alleviates the pressure on homebuyers for the down payment but also carries certain risks. “After paying the down payment, if homebuyers later decide not to purchase the property or are unable to pay the remaining down payment, it may lead to transaction risks.”
Regarding the new policy in Jiaozhou about the down payment for families purchasing their first home and facing financial difficulties, the popular social media account “Xia Xiaodaoji” with 490,000 followers raises questions, asking, what does it mean to face financial difficulties? How is that defined? If one is facing financial difficulties, why are they buying a house?
The account suggests that the installment of down payments led by local governments indicates the current state of panic in third, fourth, and fifth-tier cities. This approach may lead to a subprime crisis.
According to “Xia Xiaodaoji,” the government’s approval of such sharp measures also illustrates that the mainland’s property market is seriously ill and requires strong intervention.
The social media account “Xin Wang Real Estate” expresses concerns that this is a trap. If ordinary people cannot come up with a 150,000 down payment for a 1 million yuan house and only need to pay 75,000 as the down payment, it will lead to an increase in loans and interest payments. People might get fined if they cannot afford to pay their low down payment while facing difficulties repaying the mortgage. If the auction price of the repossessed house falls below 850,000, other assets under one’s name will be used as collateral to repay the bank.
They mention that if the auction price of the house is lower than the amount owed to the bank, one might find themselves in lifelong debt to the bank, leading those who default on their repayments to be heavily indebted, with the house taken away and still owing a significant amount to the bank.
Netizens respond to the situation by saying, “Houses really can’t be sold anymore.” “Don’t fall for the trick, is there anyone making money from buying houses? Being a real estate agent nowadays is really tough.” “Taking out a loan to buy a house is a pitfall, once you fall in, it’s over. Absolutely do not take out a loan to buy a house.” “The noose for hanging has been lengthened again.”