China eases mortgage policies in relief for property sector

After months of speculation, China’s housing market has finally seen a series of policy changes to help relieve the country’s struggling property sector.
After months of speculation, China’s housing market has finally seen a series of policy changes to help relieve the country’s struggling property sector. On Friday, the People’s Bank of China eased some borrowing rules and cut the reserve requirement ratio for foreign exchange deposits from the current 6% to 4% starting September 15.  Some of the borrowing rule changes included reducing the down payment ratio, cutting existing mortgage interest rates, and relaxing requirements for first-home buyers.  The relaxed requirements for first-home buyers are set to lower the threshold and cost of buying a house in Beijing, Shanghai, Guangzhou, and Shenzhen.  For example, in Beijing, the down payment ratio for a condo will be lowered, resulting in a decrease of 1 million yuan (A$212,000) for the down payment of a house priced at 4 million yuan (A$850,000). The mortgage interest rate will also drop from 5.25% to 4.75% which has the potential to save borrowers 260,000 yuan ($A55,000) in a mortgage loan that lasts 25 years.  Some of China’s largest banks also cut interest rates on yuan deposits, including the Industrial and Commercial Bank of China, China Construction Bank Corp and Agricultural Bank of China.  In further relief for the Chinese property sector, embattled Chinese developer, Country Garden, also won approval from its creditors to extend payments for an onshore private bond.  Country Garden was seeking approval from its creditors to extend the maturity on a 3.9 billion yuan (A$830 million) onshore private bond in a vote that ended on Friday night.  As a result, Hong Kong-listed property stocks surged on Monday, led by Country Garden Holdings which was up 16.85%, and powering the Hang Seng Index benchmark to be the top gainer in Asia.  Going from a regional homebuilder to one of the country’s largest companies that isn’t state-owned, Country Garden is by no means out of the woods yet.  Last Wednesday, Country Garden announced it had made a record loss of 48.9 billion renminbi, the equivalent of around $A10.5 billion, for the first half of 2023. This week, the Chinese property developer must come up with $22.5 million, the end of a grace period for the missed payments. China’s policy changes and relief measures may be one small step to bolster an industry that has been crippled by Covid lockdowns, a government crackdown on reckless borrowing by property developers and years of prioritising state-owned businesses over private enterprises.  Accounting for more than half of global new home sales and home building, China’s property sector is the largest asset class in the world, with an estimated market value of around A$96 trillion. Past performance is not a reliable indicator of future performance.
 

This Week’s News

News

31st May 2024

Top geo backed by leading resources funds believes he has discovered a potential new gold-copper district

News

8th May 2024

BHP Xplor winner coming to the ASX

News

4th May 2024

AI Industrial Revolution: Aussie company unlocking AI for multinationals

General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG)

including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.