China has introduced a fresh wave of economic stimulus measures aimed at rejuvenating its struggling property market and stabilizing the weakening yuan. These initiatives represent the latest efforts to bolster confidence in the world's second-largest economy. The policy announcements, coupled with signs of a manufacturing sector uptick in August, led to modest gains in Asian stock markets on Friday.
In a joint statement from the People's Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR), it was revealed that minimum down payment requirements for mortgages will be reduced to 20% for first-time buyers and 30% for second-time buyers across the nation. This is a significant change from previous requirements in cities like Beijing and Shanghai, where homebuyers had to secure down payments of at least 30% to 40%.
Furthermore, interest rates on new mortgages are being cut by approximately 40 percentage points following the central bank's adjustment of the minimum premium to its benchmark loan prime rate. In a separate statement, regulators disclosed that rates on existing mortgages for first-home purchases can be renegotiated starting September 25, with banks being encouraged to offer lower rates. This move is expected to reduce interest expenses for borrowers, promoting increased consumption and investment.
In response to these changes, several major commercial banks, including ICBC, China Construction Bank, and Agricultural Bank of China, lowered their deposit rates by 10 to 25 basis points on Friday. This coordinated action is designed to pave the way for banks to adjust their mortgage rates in line with the new regulatory requirements.
These measures are anticipated to benefit approximately 40 million homebuyers and could impact about two-thirds of the country's housing loans, totaling 25 trillion yuan ($3.5 trillion). According to John Lam, head of China and Hong Kong property at UBS Investment Bank Research, this policy shift is seen as positive and different from previous ones, as it is a nationwide approach that strengthens homebuyers' confidence in property price stability. Additionally, it is expected to reduce the upfront costs of homeownership in many major cities and potentially halt the downward trend in the housing market if it boosts overall confidence.
This article is credited by: CNN
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