(Bloomberg) -- China’s Shenzhen rolled out two new homebuying measures in the same day as authorities seek to arrest a slump in the property market.
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The technology hub in southern China connecting Hong Kong will lower the down-payment ratio for second homes to 40% from as much as 80% effective Thursday, the state-run Xinhua News Agency reported, citing a notice from the local branch of China’s central bank.
The local authorities also relaxed the definition of so-called “ordinary housing,” or non-luxury homes that qualify for lower down payments, according to a statement from the city’s Housing and Construction Bureau. The requirement that transaction values must be lower than 7.5 million yuan ($1.05 million) has been removed, according to Xinhua.
Shenzhen’s new rules may encourage home upgrades and boost demand for larger homes, said Yan Yuejin, research director at E-house China Research and Development Institute. The announcement “suggests that tier-one cities’ mortgage policy has been further eased,” Yan said.
With these changes, the buyer of an 8 million yuan home in Shenzhen can reduce their down payment by about 3.2 million yuan, according to an analysis by Leyoujia, a local realtor. The measure will likely drive activities in the subdued housing market and boost buyers’ confidence, it added.
The loosening is the latest effort by authorities to stabilize the nation’s real estate market, which along with related industries accounts for about 20% of the economy. China’s home prices fell the most in eight years in October, signaling the property slump is worsening even after the government ramped up efforts to revive demand.
Since 2016, China has sought to suppress real estate demand in its biggest cities by treating buyers with previous mortgages as second-time purchasers, substantially raising down-payment requirements for those who have bought homes before. In September, Guangzhou became the first top-tier city to ease the restrictions, cutting the rate to at least 40%.
With Shenzhen now following suit, focus will be on Beijing and Shanghai, two other tier-one cities with greater political and financial significance.
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