On June 26th, the Beijing Municipal Government official announced a policy to lower the down payment for home loans and reduce mortgage rates, aiming to stimulate the real estate market. However, contrary to the views of industry experts, the public does not view this favorably.
The notice jointly issued by the Beijing Municipal Commission of Housing and Urban-Rural Development, and the Beijing branch of the People’s Bank of China, among four units, released the “Notice on Optimizing Policies and Measures for the Stable and Healthy Development of the Real Estate Market in Beijing.”
The notice indicates a reduction in the minimum down payment ratio for new commercial and accumulation fund personal housing loans, with the down payment ratio for the first home purchase lowered to no less than 20%, and for the second home purchase within the Fifth Ring Road of Beijing, the down payment ratio reduced to 35%, while outside the Fifth Ring Road, it is set at 30%.
Prior to this, the down payment ratio for the first residential property in Beijing was uniformly 30%, and for the second residential property, it was 50% in the city’s six districts and 40% in non-six districts.
Furthermore, mortgage rates have been lowered. The notice states that the minimum loan interest rate for home purchases has been adjusted to no less than the corresponding period’s loan market quoted rate (LPR) minus 45 basis points, with the new minimum rate for mortgages with a term of over five years set at 3.5%. For the purchase of a second home in Beijing within the Fifth Ring Road, the minimum loan interest rate has been adjusted to no less than LPR minus 5 basis points.
Under the new mortgage interest rate, the adjusted minimum rate for mortgages with a term of over five years is 3.9% within the Fifth Ring Road area, and 3.7% outside the Fifth Ring Road area.
Additionally, the notice states that households in Beijing with two or more children with Beijing residency, when purchasing a second home, will be considered as a first home for individual housing loans. And for families purchasing green buildings of two-star or higher rating, prefabricated buildings, or ultra-low energy buildings, the amount of accumulation fund loans can be correspondingly increased. For borrowers purchasing two-star or three-star green buildings, the loan amount can be increased by 200,000 yuan and 300,000 yuan respectively.
Furthermore, the notice proposes the organization of a housing “old for new” activity.
Following the new policies of lowering down payments and mortgage rates in the other three first-tier cities of Shanghai, Guangzhou, and Shenzhen on May 27th and 28th, Beijing has also followed suit.
On those dates, Shanghai, Guangzhou, and Shenzhen successively issued corresponding policies to reduce down payment ratios and mortgage rates. Shanghai and Shenzhen have adjusted their down payment ratios to align with Beijing, at 20% for first homes. For second homes in Shanghai, the down payment ratio in core areas has been reduced to 35%, and to 30% in non-core areas, while in Shenzhen, the minimum down payment ratio for second homes has been lowered to 30%. Guangzhou’s minimum down payment ratio for first homes has been adjusted to no less than 15%, and for second homes, no less than 25%, and both cities have eliminated the lower limit on interest rates.
Regarding Beijing’s new policies to stimulate property sales, Li Yujia, chief researcher at the Guangdong Provincial City Planning Institute’s Housing Policy Research Center, analyzed on CaixinNet that lowering the down payment ratio reduces the threshold for home purchases, making it easier for many young people and new residents to enter the market. Beijing’s policy to increase the amount of accumulation fund loans is also expected to drive the release of demand from some working-class households.
Zhang Dawei, chief analyst at China Real Estate, told the media that this is the 9th loosening of housing market policies in Beijing in eight months since September 2023.
Zhang believes that overall, the policy efforts from the central to local governments, from Beijing to Shanghai, are significant, and if the real estate market fails to recover as expected in the future, it is expected that more policies will be introduced.
Contrary to the experts’ views, mainland netizens are not very interested in these policies aimed at stimulating the real estate market, and they are not optimistic.
A Tencent user, kzs43j7, commented: “The ordinary people say housing prices are too high! You lower the interest rates, reduce down payments, but unless you significantly lower house prices, try selling at 5,000 yuan per square meter. It’s tough for ordinary people to make ends meet, right?”
Netizen “小山東” said: “Even with a lower down payment, you still have to repay the loan.”
“Windtalker” is also not optimistic about the new real estate policies: “It’s not like a 20% reduction in total price.”
Netizen “老鄭” lamented: “For ordinary salaried workers working in first and second-tier cities, working their whole lives, not spending a penny, still unable to afford a house in the city they work in, this is not normal. Since it’s not normal, let the market determine house prices, so that everyone has a place to live!”