(Yicai) Aug. 26 -- Chengdu in southwestern Sichuan province has become the latest Chinese city to introduce new property rules, including mortgage interest subsidies, to alleviate homebuyers’ financial pressure.

Residents who buy a house in Chengdu between yesterday and Dec. 31 and apply for a personal housing provident fund loan and make a downpayment of 15 percent will receive a 20 percent interest subsidy valid for one year, capped at CNY25,000 (USD3,720) per applicant, according to the new policy issued yesterday.

More than 20 Chinese cities have optimized old mortgage interest subsidy policies or released new ones so far this year, according to data compiled by Yicai. However, most subsidy programs in effect mostly benefit personal housing provident fund loans, with very limited coverage for commercial mortgages.

Current mortgage interest subsidies prioritize personal housing provident fund loans, and they are only supplemented by commercial mortgage subsidies, Dong Ximiao, chief economist at Merchants Union Consumer Finance, told Yicai.

However, he cautioned that these subsidies are mostly temporary, targeted programs covering a narrow pool of recipients, Dong said. “These subsidy measures carry stronger short-term signaling value,” he explained. “They can stabilize market expectations and bolster property transactions to some extent, but their scale impact is relatively limited and insufficient to reverse the overall market trend.”

Fiscal sustainability would be the biggest obstacle to nationwide roll-out, according to Dong, who projected mortgage interest subsidies will gradually become more inclusive over time.

“Mortgage interest subsidies are an innovative tool in the current macro policy toolkit,” Dong noted. “A nationwide subsidy program could serve as a key incremental policy option going forward, with local governments taking the lead in implementation.”

Chen Wenjing, director of policy research at the China Index Academy, believes that mortgage interest subsidies are refined local measures to support housing consumption. She anticipates more cities will adopt similar schemes, and local-level subsidy policies will continue to deepen.

“Existing mortgage interest subsidy programs have emerged as an important instrument for local authorities to fine-tune housing support and cut home-buying costs,” Chen said. “Looking ahead, expectations for a nationwide mortgage interest subsidy policy remain nil in the short run, with future implementation likely to remain localized.”

Dong put forward four recommendations for the future design of mortgage interest subsidy policies.

The first is to moderately expand subsidy coverage for commercial personal housing loans, extending benefits from specific talent groups to a broader base of first-home buyers with mortgages. The second is to establish a cost-sharing mechanism between central and local governments, modeled on fiscal subsidies for personal consumption loans, to ease local fiscal pressure and sustain the subsidy programs.

The third suggestion is to align incentives for new and outstanding mortgages and consider modest subsidies for existing mortgages to avoid stark policy disparities between new and existing homebuyers. The fourth is upholding customization, as cities should set different subsidy rates and tenors based on local housing prices and fiscal capacity, allowing jurisdictions with stronger finances to offer higher subsidy ratios where appropriate.

Editor: Futura Costaglione