Banks in Wuxi, Jiangsu province have cut the mortgage rate for first-time home buyers to below 4 percent, financial news provider CLS reported on Wednesday.

CLS said some banks in Wuxi have lowered the mortgage rates for first-time buyers from 4.1 percent to 3.8 percent, and they can apply for home mortgages at the lowered interest rate from Wednesday.

The mortgage rates for second-home buyers remains unchanged at 4.9 percent, according to CLS.

The reduction in mortgage rates came as China announced in January the establishment of a mechanism that allows local governments to adjust the regulatory floor of mortgage rates upon changes in local home prices, as part of its stepped-up efforts to promote steady and healthy development of the property market.

Under the mechanism, cities where new home prices fall for three months in a row on both a monthly and yearly basis are allowed to temporarily maintain, lower or cancel the local lower limit of mortgage rates for first-time buyers, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a joint statement in January.

Source: china daily

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New home prices fell for the 16th consecutive month in December, the government said last month. Contracted sales by the nation’s top 100 developers amounted to 354.3 billion yuan (US$52.2 billion), a 32.5 per cent slide from a year earlier, according to CRIC, a Shanghai-based real estate consultancy.

While many smaller mainland cities like Dongguan and Foshan in southern Guangdong province have completely scrapped such ownership limits, Wuhan, which generated 1.89 trillion yuan in GDP in 2022, is the first of China’s 10 largest cities by GDP to completely remove the cap on additional home purchases.

Since late last year, six other top GDP-ranked cities have also tweaked their incentives to help revive home sales, though without going the full distance in abandoning the cap.

For example, ninth-ranked Hangzhou in eastern Zhejiang province said in May that families with three children would be allowed to buy one more unit. In December, the Chongqing municipality said non-locals can enjoy the same benefits accorded to people with hukou.

Guangzhou in southern Guangdong province, Suzhou and Nanjing in eastern Jiangsu province and Chengdu in southwestern Sichuan province all made similar moves late last year to re-energise their local property markets.

Those measures appear to have the tacit approval of the central government. Ni Hong, the minister for housing and urban-rural development, pledged to boost consumer confidence in the real estate market, state-run network China Central Television reported last month.

Market observers expect to see more efforts to ease the additional home purchase ban. That, however, is not likely to happen in Shanghai, Beijing or Shenzhen, according to Bruce Pang, head of research and chief economist for Greater China at JLL, a property consultancy.

“Home prices in these three cities are still quite stable, and thus they do not have the incentive to do so,” he said. “They may have small favourable policies towards particular targeted groups, for example graduates with good education backgrounds. A total abandonment of the purchase ban is very unlikely.”

Source: SCMP

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