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Guangzhou, Shenzhen Follow Shanghai in Easing Home-Buying Policy

Guangzhou and Shenzhen, two first-tier cities in China’s southern Guangdong province, have followed Shanghai in lifting curbs for homebuyers after the country’s central bank eased real estate market restrictions earlier this month.

Guangzhou became the first Chinese first-tier city to remove the minimum interest rate on mortgages yesterday. Meanwhile, Shenzhen lowered the minimum rate on first- and second-time home loans to 3.5 percent and 3.9 percent from 3.85 percent and 4.25 percent, respectively, on the same day.

On May 27, Shanghai was the first of China’s first-tier cities to cut mortgage interest rates after the People’s Bank of China eased its housing policy on May 17. The eastern city trimmed the minimum rate on first home mortgages to 3.5 percent from 3.85 percent and that on second home mortgages to 3.9 percent from 4.25 percent. It also reduced the minimum downpayment for first and second home purchases to 20 percent and 30 percent from 35 percent and 50 percent, respectively.

Guangzhou and Shenzhen also lowered their minimum downpayment ratios yesterday. Guangzhou cut the rates for first home buyers to 15 percent from 20 percent and for second home buyers to 25 percent from 30 percent. Meanwhile, Shenzhen trimmed both rates by 10 percentage points to 20 percent and 30 percent, respectively.

Guangzhou also allowed residents in non-restricted areas to apply for loans to purchase a third house if they have fully repaid their previous mortgages. In that case, financial institutions will decide the downpayment ratio and mortgage interest rate, depending on the borrower’s solvency and credit status.

In the past, the mortgage policy for third homes was stringent, said Yan Yuejin, research director at the E-House Research Institute, adding that Guangzhou’s new policy is innovative and can be a reference for other cities.

Moreover, the Guangzhou districts of Baiyun, Haizhu, Liwan, Nansha, Tianhe, and Yuexiu cut to six months from two years the time non-permanent residents need to have paid into the city’s social security system in order to qualify to buy homes there.

As Guangzhou’s housing policy determines that buyers’ qualifications depend on the number of houses owned in each district, residents can actually purchase multiple homes across the city, said Li Yujia, chief researcher at the Guangdong Provincial Housing Policy Research Center.

Even though Guangzhou lifted purchase restrictions on houses bigger than 120 square meters on Jan. 27, the price index of new and second-hand houses fell by a new record high in April, Li noted.

On May 7, Shenzhen lifted some restrictions on home-buying. The city allowed households with two children to buy up to three houses in non-core urban areas and lowered the social insurance and individual income tax requirements needed for people to be recognized as permanent residents, thus allowing them to buy homes in non-core urban areas.

The previous easing, together with the lowering of the downpayment ratios and mortgage interest rates, will significantly reduce the cost of buying a home in Shenzhen, boosting the local real estate market, according to property data provider Leyoujia.Com.