China Lowers Down Payment Requirement For First Time Home Buyers

There’s an economic slowdown happening in China this year, and the Chinese government is taking active steps to reverse it. Among the most recent policy changes is one meant to spur the sagging real estate market: lowering the minimum down payment for first time home buyers from 30% to 25%.

The Wall Street Journal reports:

SHANGHAI—China’s central bank reduced down-payment requirements for buyers of first homes in most cities, the latest effort to boost the flagging economy by reviving the vital real-estate sector.

The People’s Bank of China said Wednesday it cut the minimum down payment required from first-time home buyers to 25% from the previous 30%. The cut applies in all but a handful of the largest cities, such as Beijing, Shanghai, Shenzhen and Guangzhou, where demand remains strong and which impose restrictions on second or subsequent homes to suppress price increases.

Housing sales and prices in second- and third-tier cities have shown some nascent signs of improvement in recent months, but these signs don’t appear to have stabilized yet,” said Song Huiyong, research director at Shanghai Centaline Property.

Real estate has been at the center of China’s economic woes, with the effects of residential overbuilding during the boom years now dragging down the world’s second-largest economy. Restoring growth would be a boon to the overall economy, given that real-estate development and its related industries—from concrete to furniture—accounted for about a quarter of all economic activity before the sector began cratering two years ago.

The down-payment cut followed more signs that the economy is struggling. Housing sales in September, typically a peak season, have fallen short of expectations in many cities, according to preliminary figures from private-sector data providers.

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