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Published on : Sep 30, 2015

China will be slashing the minimum level of down payment for first time home buyers in several cities, the country said, increasing its support for the slump in the property market as well as the overall turbulent economy.

This was the second measure in two days that is aimed at increasing consumption after a decision by the government to cut the sale tax of small cars by half. 

The banking regulator and the central bank stated that they would be bringing down the minimum level of down payment for those looking to buy a home for the first time to 25 per cent in cities that have no limitations on purchases. The previous minimum down payment level was 30 per cent. 

The move is aimed at supporting a practical consumption pattern when it comes to housing, according to a statement by the China Banking Regulatory Commission and the People’s Bank of China, which was posted on the website of the central bank on Wednesday.

The property industry in China has been going through a rough patch over the past year or so. This has resulted in slow sales, which in turn has led to the overhang of unsold apartments. It has also impacted the demand in all areas from home appliances, to steel to furniture. 

Head of research and consultancy of the Greater China division at Knight Frank, David Ji said that the relaxed rule will be helpful. However, the impact will not witnessed immediately mainly due to the fact that the primary reason behind high inventory in some cities is transportation and bad location. 

Ji added that the new rule is estimated to fuel demand from buyers who are already on the sidelines observing. This will nudge them in getting them to enter the market.