China eases down payment to 20% for first homes

CHINA’s central bank said it will allow banks to cut the minimum required mortgage down payment to 20% from 25% for first home purchases as it steps up support for the property market.

The eased requirements will be for buyers in areas without the purchase restrictions that are applied in some of the biggest metropolitan areas such as Beijing and Shanghai, the People’s Bank of China said on Tuesday, in a statement on its Web site. The minimum down payment for second home purchases was cut to 30% from 40%, the central bank said.

A rising stockpile of unsold new homes is hampering government efforts to spur investment expanding at the slowest pace in more than five years. China’s politburo, the top decision making body of the Communist Party, in early December vowed to reduce home inventory as one of its key tasks in 2016, the official Xinhua News Agency reported.

“This is clearly in line with the ‘destocking’ theme in the property market,” Zhou Hao, an analyst with Commerzbank AG in Singapore, wrote in a note to clients on Tuesday. “We believe that the relaxation of mortgage policy will somewhat help accelerate the destocking process in the lower-tier cities.”

Reviving investment in real estate is crucial for the government, which has stepped up monetary easing with its sixth interest rate cut since late 2014 and scrapped a ceiling on deposit rates.