Chinese Central Bank Supports Real Estate Market and Consumption

The Chinese central bank announced on Tuesday new measures aimed at boosting the sale of residential properties and reviving consumption by alleviating the financial burden on households.

The central bank wants to encourage commercial lenders to lower interest rates on approved mortgage loans for purchasing residential properties by an average of half a percentage point, said Governor Pan Gongsheng at a press conference.

– The reduction will help 50 million households and 150 million citizens (…) and result in a decrease in interest payments that families must make by an average of 150 billion yuan (21 billion dollars) annually – said Pan.

This move will significantly reduce the financial burden for property buyers and stimulate domestic consumption and capital investments to support the stability and growth of the real estate market, emphasized the Chinese governor.

The minimum down payment for purchasing residential property will simultaneously be reduced from 25% to 15% of the loan amount, and the central bank will also lower the mandatory reserve for commercial lenders by half a percentage point, which will provide an additional trillion yuan (127 billion euros) in liquidity to the financial market, added the governor.

Chinese Crisis

The central bank has also equalized the minimum down payment for purchasing first and second properties, which will now be 15% of the loan amount, emphasized Pan. Until now, buyers of second properties had to pay a down payment of 25% of the amount, reports The Global Times.

The bank will also fully take over the refinancing program for affordable housing, valued at 300 billion yuan, they added. This measure is expected to accelerate the sale of vacant apartments, notes The Global Times.

– We will soon publish official documents, but banks will need time to prepare their systems – noted the governor, emphasizing that the central bank’s goal is to improve the pricing system for mortgage loans and open space for commercial banks and borrowers to adjust loan terms according to market conditions.

The mandatory reserve for commercial banks will also be reduced by half a percentage point to strengthen liquidity.

The crisis in the Chinese real estate market is a burden on the second-largest global economy, and the program for purchasing vacant state apartments has not yet gained significant traction, notes the German news agency dpa.