China Helps First-Home Buyers as Market Cools
The Chinese government is pushing in two directions as it seeks to slow price growth while avoiding a collapse. It’s lowering borrowing costs for first-time homebuyers to encourage purchases while Premier Wen Jiabao keeps curbs in place to stem the speculators who have helped drive home prices up by as much as 140 percent since 1998, Bloomberg reported. China’s 18 percent first-quarter drop in home sales contributed to the slowest economic growth in almost three years. “Property is an important sector for China’s economy,” said Jack Gong, a Hong Kong-based property analyst at Jefferies Group Inc. “The central government will not forcefully crack down on the market even if it is not supporting it. Fine-tuning the mortgage policies shows the government’s clear intention to uphold economic growth.” The benchmark rate for mortgages in China is the five-year lending rate set by the People’s Bank of China, currently 7.05 percent. Bank of China, China Construction Bank Corp. and Agricultural Bank of China Ltd. offer as much as a 10 percent discount to borrowers the banks deem as safest in Beijing, while smaller lenders such as China Merchants Bank Co. and Bank of Beijing Co. are charging the benchmark rate, according to Bacic & 5i5j Group, Beijing’s second-biggest real-estate agency. Lenders in Beijing started offering mortgages to first-home buyers at or below the central bank’s benchmark rate in February, compared with rates 5 percent to 10 percent higher in the second half of last year, said Wu Hao, a manager at the loan brokerage of Bacic & 5i5j. Home buyers in Beijing and Shanghai could get as much as a 15 percent discount, according to the realtor. The lower mortgage rates for those buying their first properties are an indication that the government may gradually ease its more stringent home-purchase restrictions in the second quarter, according to CLSA Asia-Pacific Markets, a unit of Credit Agricole SA. Read more.