(Yicai) June 27 -- Beijing has become the last of China’s four first-tier cities to relax mortgage and downpayment rules, after house prices in the capital slid further and the country’s central bank eased property market restrictions nationwide.

For first-time homebuyers, the minimum mortgage rate is now 3.5 percent (45 basis points under the central bank’s five-year loan prime rate), the city’s housing commission said yesterday. On second homes, it is 3.9 percent (five bps below the LPR) within the Fifth Ring Road and 3.7 percent (25 bps under the LPR) outside that.

The People’s Bank of China kept the five-year LPR, the mortgages reference rate, at 3.95 percent for the third month in a row in June.

Beijing also lowered the downpayment floor to a minimum 20 percent from 30 percent for first-time buyers, and to 35 percent for second homes within the Fifth Ring Road and 30 percent for those beyond.

The move is an important policy change, according to Yan Yuejin, research director of the E-House China Research and Development Institute. Cheaper home loans and lower downpayment levels will significantly ease the burden on buyers and lower the barrier to home ownership, he said.

The city authorities also said they would support the reasonable housing needs of families with more than one child and allow two or more children households registered in the city to buy a second home with a mortgage on the same terms as the first.

The policy easing comes after new home sales in Beijing fell 1.1 percent in May from April and 1.8 percent from a year earlier, with those of pre-owned homes down 1.2 percent and 8.6 percent, respectively, according to the housing commission’s figures.

Sales in China’s three other first-tier cities of Guangzhou, Shanghai, and Shenzhen improved after they eased their housing policies, said Chen Wenjing, director of market research at the China Index Academy. Market sentiment is also expected to pick up in Beijing, she added.

In addition to lending rates, Beijing has other areas of housing policy that it can relax, such as reducing the number of social security and income tax payment years needed to qualify for permanent residence and easing the house purchase limit for certain groups, Chen added.

Nationwide Easing

The People’s Bank of China eased property market restrictions on May 17, lowering the minimum downpayment to 15 percent on first homes and 25 percent on second homes, and by cutting individual housing provident fund rates by 25 bps. It also set up a CNY300 billion (USD41.3 billion) relending facility for government-subsidized housing projects.

On May 27, Shanghai became the first mega city to pare mortgage rates in the wake of the PBOC’s policy easing, cutting the minimum rate for first-time buyers to 3.5 percent from 3.85 percent and that on second homes to 3.9 percent from 4.25 percent. It also trimmed the downpayment on first and second homes to 20 percent and 35 percent of the price from 30 percent and 50 percent, respectively.

Guangzhou and Shenzhen fell in line the next day. Guangzhou, the capital of Guangdong province, became the first first-tier city to remove the mortgage rate floor, while Shenzhen lowered it on first and second home loans to 3.5 percent and 3.9 percent from 3.85 percent and 4.25 percent.

The pair also dropped the minimum downpayment, with Guangzhou cutting it to 15 percent from 20 percent for first-time buyers and to 25 percent from 30 percent for second-home buyers. Shenzhen trimmed both by 10 percentage points to 20 percent and 30 percent, respectively.

Editor: Futura Costaglione