Beijing's Latest Diktat: Not Just More Kids, More Home Purchases Too, Please

China has decided to rejuvenate its struggling property market by easing regulations that imposed higher mortgage rates and down payments for individuals seeking to buy a new home, while already owning one.

To prevent the property market from overheating due to speculative activities, the country had previously set higher mortgage rates and down payments for second and subsequent homes.

In major cities like Beijing and Shanghai, people's mortgage history and the number of properties they owned also influenced their eligibility for favorable rates.

Those with past mortgages were treated as if they were purchasing a second home, facing higher interest rates and down payments even when looking to buy a new primary residence.

However, the new deregulation measures aim to remove records of past mortgages and other factors from rate calculations. When relocating, individuals will now benefit from easier rates and other favorable conditions.

These changes are expected to result in a drop in interest rates when buying a new home in Beijing from 5.25 per cent to 4.75 per cent per year, according to Shanghai Yiju Real Estate Research Institute.

Additionally, the minimum down payment as a percentage of the total purchase price could decrease from 80 per cent to as low as 35 per cent.

Housing and Urban-Rural Development Minister Ni Hong, who leads China's real estate policy, held discussions with real estate and construction companies before announcing these measures after a Politburo meeting on Monday (24 July), as reported by Asia Nikkei.

Moreover, the government is considering lowering mortgage rates and down payment ratios for first-time buyers and exploring the possibility of tax cuts during relocations.

Currently, condominium sales in China continue to decline, putting downward pressure on prices, which fell month-on-month for both new and used units in 70 major cities in June. The government is taking these steps to restore balance to the housing market.

It is worth noting that the frequently used phrase "housing is for living and not for speculation" was notably absent from the discussions at the recent Politburo meeting on Monday (24 July).

Following this announcement, the Hong Kong Stock Exchange experienced widespread gains on Tuesday, as investors hoped for a revision to this longstanding policy.