Beijing: China’s recent policy incentives to help the troubled real estate sector recover sooner rather than later are shoring up market sentiment, creating a potential positive direction for the future, experts say.

       “Various favourable policies have been successively introduced recently, like reducing down payment ratios, lowering mortgage interest rates and adjusting eligibility criteria for first-time home buyers.

       “These measures are very conducive to reducing the costs associated with buying homes and increasing the enthusiasm for buying homes in the future,” said Yan Yuejin, research director of Shanghai-based E-House China Research and Development Institution.

       “China’s real estate market is showing some positive signs of a steady recovery.

       “For instance, real estate enterprises in Guangzhou, Guangdong province, are actively promoting properties for sale. This may help boost sales during the traditional peak period of September and October. Any such boost would also brighten the market sentiment.”

       Market expectations are also improving, helping bolster the confidence of home buyers, Yan said.

       “Inquiries from prospective home buyers in Guangzhou are rising sharply. We are optimistic about the market performance during the next two months.”

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       Last Thursday, the People’s Bank of China (PBoC), the country’s central bank, and the National Financial Regulatory Administration said in a joint statement that home buyers can negotiate with lenders to reduce the interest rates on their mortgages from Sept 25 and enjoy reduced down payments.

       The PBoC said minimum down payment nationwide will be 20% of the total property price for first-time home buyers and 30% for second-time buyers.

       Yan of E-House said that prior to the PBoC announcement, many cities had stipulated a minimum 40% down payment for second-time buyers.

       For second-home mortgages, the floor for interest rates is adjusted to the level of the loan prime rate (LPR) plus 20 basis points. This marked a notable reduction from the previous floor of the LPR plus 60 basis points.

       Last week, all four of the country’s first-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen, eased policies on residential property purchases.

       Households in those cities with mortgage records but no local home ownership will be treated as first-time home buyers, eligible for favourable down payments and lower mortgage rates.

       Liu Ge, senior researcher at the Chongyang Institute for Financial Studies, which is part of the Renmin University of China in Beijing, said a reduction in mortgage interest rates will lead to a win-win scenario for both home buyers and commercial banks, against the backdrop of an increasing number of people seeking to repay their home loans earlier than scheduled.

       Early repayments may affect banks’ profits. The policy to lower mortgage rates may also boost overall consumption as people will have more disposable income. Market-oriented adjustment will play an essential role in reducing mortgage rates, Liu said.

       Yan agreed. The adjustment of mortgage rates, he said, resulted from the rising number of early repayments over the past two years and the pressure of higher monthly payments on households.

       In this context, commercial banks are said to be formulating new regulations and contracts to address the needs of different groups of customers. — China Daily/ANN