Cities allowed to decide on easing, to spur demand from first-time buyers

Chinese housing and financing regulators have left it to city-level governments to decide if families that own no property in the region, are to be treated as first-time homebuyers eligible for favorable mortgage conditions, Xinhua News Agency reported on Friday.

Experts said the optimization of the housing mortgage policy would help actualize the potential of the domestic real estate market, besides meeting people's demand for a higher standard of housing.

They also called for more supportive measures to revitalize the sluggish real estate market, which has been a drag on the Chinese economy.

Their comments came as Xinhua reported that the Ministry of Housing and Urban-Rural Development, the National Financial Regulatory Administration and the People's Bank of China, the country's central bank, issued a circular recently promoting the implementation of the mortgage policies.

The circular said people who own no home now may be treated as first-home buyers for the purposes of favorable mortgage conditions, if the local-level governments so decide.

In China, first-time home buyers usually enjoy lower mortgage rates and smaller down payments than others.

As long as homebuyers and their family members have no house registered under their names in a region, regardless of whether they have taken a loan to buy a home in the past, financial institutions are required to treat them as first-time buyers and extend favorable terms when they buy homes there, the circular stated.

The circular also stipulated that cities can choose to ease their local housing policy for first-time homebuyers based on their assessment of market conditions.

According to Zhou Maohua, an analyst with China Everbright Bank, the policy adjustment will enable homebuyers to buy bigger and better houses at a relatively lower cost now. This would go a long way toward meeting people's demand for upgraded housing and higher living standards.

"Under the premise of risk control in the banking sector, cities where home supply exceeds demand should make better use of their room for policy adjustment and adopt more measures like lowering mortgage rates and down payments for first-time homebuyers, to stimulate demand," he said.

"If people's demand for first homes and better homes is better met, the real estate market will be boosted and stabilized."

However, mortgage policy adjustment as stipulated in the circular should be done very prudently in first-tier cities, if the demand and supply of homes there are balanced, Zhou said.

Dong Ximiao, chief researcher of Merchants Union Consumer Finance Co Ltd, said the newly announced adjustments will reduce costs for homebuyers and help stimulate market demand.

He stressed that details should be clarified for better implementation of the new rules, such as stipulating whether owning a home in the suburban areas of a city will disqualify people as first-time buyers.

Besides, he said further adjustment of the real estate policies, including easing restrictions on purchases and loans, should be made to boost demand and vitalize the market. He suggested that lowering mortgage rates for people buying a second home and reducing some high rates of existing mortgage loans would help improve the market situation.

In another development, the country's Ministry of Finance also announced the extension of some favorable tax policies for homebuyers.

According to a statement on its website, the ministry and tax and housing regulators have jointly decided to refund part or all of the personal income tax on home transactions to people who, after selling their old homes, purchase new homes within one year in the same directly administered municipality or prefecture-level city. This refund policy will be applicable from Jan 1, 2024 to Dec 31, 2025.