China has unveiled its largest package of measures to support the property market to date, which includes lowering mortgage rates and easing down payment requirements for second homes.
The People's Bank of China (PBOC) plans to cut mortgage rates for individual borrowers by an average of 0.5 percentage points. The minimum down payment for second homes will be reduced from 25% to 15%.
The measures are aimed at limiting the housing-induced slowdown in Asia's largest economy. They come after economists at banks including UBS Group AG, JPMorgan Chase & Co. and Bank of America Corp., predicted that China will miss its growth target this year.
Homeowners will first be able to renegotiate terms with their current lenders, before regulators consider refinancing with another bank. The interbank mortgage refinancing, if approved, would be the first since the global financial crisis and is likely to increase competition among lenders.
The PBOC will also expand its refinancing program for state-owned companies to allow them to acquire unsold real estate inventories.
Market watchers warn that the package of measures is far from revitalizing the property sector and the economy.
„The package is a step in the right direction compared with the previous stream of support. But this is unlikely to be enough to spur a turnaround in growth unless it is followed by more fiscal support," said Julian Evans-Pritchard, head of China economics at Capital Economics.
It is already known that China will fail to meet its growth target in 2024. Economic momentum has slowed due to a slump in the real estate market and tight fiscal policies.
As early as 2022, the American financial conglomerate Morgan Stanley predicted that the problems in the Chinese real estate market could trigger a global financial crisis, as happened in 2008 with the difficulties in the US real estate market. Therefore, understanding the situation in China can help investors make informed decisions.
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