PBOC acts to boost home sales

Down payments for first-time buyers cut for the second time in five months

A sales woman introduces an overseas property program to visitors at a spring real estate exhibition held in Beijing, April 17, 2015. [Photo/IC]

In a bid to revive China's urban housing market, the central bank lowered the minimum down payment for first-time homebuyers on Tuesday for the second time in less than five months.

The People's Bank of China and the China Banking Regulatory Commission announced that the down payments for first-time homebuyers would be reduced from 25 percent to 20 percent. Economists described the move as "pointing to the healthy growth of the market".

Unsold homes in China rose by 11.2 percent last year to a total of 452 million square meters, according to the National Bureau of Statistics.

In October, China lowered first-time homebuyers' minimum down payment requirement from 30 percent — at which it had stood since 2010 — to 25 percent to curb a rapid rise in urban housing prices.

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China in Beijing, said Tuesday's down payment adjustment would help China to reduce the inventory of unsold housing at a time of general economic slowdown and lackluster business.

In tandem with the rate reduction for first-time buyers, down payments required for second homes will fall from 40 percent to 30 percent, a joint statement by the central bank and the CBRC said.

However, the revised percentages do not apply in first-tier cities such as Beijing, Shanghai, Shenzhen, and Guangzhou, where heavy restrictions against speculative home purchases remain in place.

Industry specialists said the lower down payments would benefit the housing market in small towns near large cities.