(Yicai) Oct. 28 -- Since the Chinese government introduced mortgage interest subsidies at the end of last month to ease households’ repayment burden, the transaction volume of lower-priced, second-hand homes in China’s first-tier cities has increased.

The sales share of pre-owned houses priced below CNY1.5 million (USD224,965) in major Chinese cities has risen since the new policy took effect on Sept. 29, even though there are not many listings of such cheap apartments in first-tier cities.

The Ministry of Finance, the People’s Bank of China, and the National Financial Regulatory Administration announced on Sept. 29 that first-time homebuyers purchasing apartments smaller than 120 square meters and cheaper than CNY1.5 million would receive mortgage interest subsidies.

After the mortgage interest subsidy policy was implemented, buyers’ interest in pre-owned homes in Beijing’s Fangshan district priced at around CNY1.5 million increased, a local real estate agent told Yicai, adding that some related transactions have already been completed.

To sell faster, some owners are also willing to make price concessions to attract households seeking to benefit from the new mortgage subsidy policy. In Beijing’s Fengtai district, a small second-hand home was listed for CNY1.65 million in September, but the owner cut the price to CNY1.52 million by Oct. 14, clearly indicating that there was still CNY40,000 (USD5,999) of room for negotiation.

In Shenzhen, sales of pre-owned homes priced below CNY3 million reached a yearly high of 32.3 percent so far this month, showing that more and more households are buying properties to simply meet their living needs, according to data from the Leyoujia Research Center.

“From Oct. 1, the new mortgage interest subsidy policy took effect,” the Leyoujia Research Center noted. “Combined with the extension of mortgage terms to as long as 40 years, the policy has lowered the monthly repayment threshold for cheaper homes and accelerated the entry of buyers seeking to meet their living needs.”

Lower-priced homes have recently become the main force behind second-hand house transactions in Shenzhen, and owners’ willingness to cut prices in exchange for a sale is clearly strong, the research center pointed out.

After the mortgage interest subsidies took effect, some pre-owned homes in Guangzhou that were initially listed at CNY1.55 million to CNY1.7 million were lowered to below CNY1.5 million to meet the threshold, said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center.

In some outer districts of Guangzhou and Shenzhen, developers also cut prices of new homes originally on sale for more than CNY1.5 million to below that threshold, Li added.

Such properties were previously relatively difficult to sell, which is why their prices had fallen significantly, he explained. The mortgage interest subsidy policy is expected to boost market activity for these properties and, in turn, support price stabilization.

Some older, smaller pre-owned homes in the central districts of first-tier cities, as well as new and second-hand homes in outer districts, will continue to benefit from the interest subsidy policy, Li predicted.

Editors: Tang Shihua, Futura Costaglione