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East Asia

Guangzhou property buyers, agents snag deals as city eases measures to boost flagging sector

Latest measures by the southern Chinese city make it attractive for people like renters to buy a home, says a real estate player.

Guangzhou property buyers, agents snag deals as city eases measures to boost flagging sector
Guangzhou's new policies are expected to boost property sales and stabilise housing prices. (Photo: REUTERS/Tingshu Wang)
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SINGAPORE: She had been searching for a new home in Guangzhou for her newlywed son for the last five months. 

On Wednesday (May 28) when retired university lecturer Lucy Wang heard the news that the city would significantly ease property measures, she knew it was time to take the plunge.

“I have been wanting to buy a new property here, just waiting for a policy update,” Ms Wang, 66, told CNA. 

“With downpayment almost halved and a lower loan interest rate, I do not need to hesitate,” declared the Shenzhen resident, who already has one property in her son’s name in Guangzhou.

Her focus is now on which house to pick from among three properties between 145 and 190 square metres – one further from the central business district, or one closer to a metro station and a foreign language school, which would benefit her son when he starts a family.

Seeking to boost their flagging property sectors, three of China’s first-tier cities – Guangzhou, Shanghai and Shenzhen – further eased property rules this week.

The southern cities of Guangzhou and Shenzhen eased measures on Wednesday (May 29), a day after Shanghai.

Guangzhou eliminated minimum mortgage rates and lowered the downpayment required by 15 percentage points, to as low as 15 per cent for first-time buyers. 

It also cut the minimum downpayment ratio for second-home buyers from 40 per cent to 25 per cent, according to a local government notice.

Non-Guangzhou residents may now buy two homes in six districts if they have paid social insurance or income tax in the city for at least six months, down from the previous requirement of two years. 

The six districts, including Yuexiu, Haizhu, and Tianhe, previously allowed non-Guangzhou residents to purchase only one home.

Following the new policies, many banks adjusted their mortgage rates. The interest rate for one’s first-home loan is now 3.4 per cent, down from 3.85 per cent, while second-home loan rates have dropped to 3.8 per cent from 4.25 per cent.

A debt crisis in China's vast property sector has been a major drag on the world's number two economy. (Photo: AFP/STR)

These follow measures in January that included fully relaxing home purchase limits for some people, allowing them to buy as many properties with floor area exceeding 120 square metres as they wish. At the time, property researchers noted Guangzhou was the first tier-one city to significantly relax purchase restrictions.

Shenzhen, meanwhile, on Wednesday reduced downpayment requirements by 10 percentage points to a minimum of 20 per cent for first-time buyers, and 30 per cent for second-home buyers. 

BEIJING NEXT TO EASE RESTRICTIONS?

China is battling a property crisis that has dampened its economy and seen major property developers in debt and unable to complete projects.

Earlier this month, it announced plans for local governments to buy "some" apartments and pledged efforts to deliver unfinished homes. 

With latest data showing the fastest drop in new home prices in more than nine years, the central bank facilitated 1 trillion yuan (US$138 billion) in extra funding that will also go into affordable housing and ensuring developers have access to financing.

Guangzhou has seen the steepest decline in sale prices of newly built housing, according to the China National Bureau of Statistics. In April, prices dropped 6.9 per cent year-on-year.

The city also recorded the lowest sales prices index for second-hand residential buildings in April – at 91.9, it was lower than Beijing (94.1), Shanghai (93.7) and Shenzhen (93.2).

According to state media outlet CCTV, China’s May 17 measures are already having tangible effects, with more people viewing real estate projects now that they can afford lower downpayments.

In the wake of new measures by Guangzhou, Shanghai and Shenzhen, analysts expect Beijing to follow suit. They also expect the policies to boost property sales and stabilise housing prices, although others have cautioned of risks that come with more leveraged buyers.

The market remains jittery about unfinished pre-sold projects and falling valuations. According to Goldman Sachs, the combined value of unsold homes, unfinished projects, and unused land in China is approximately 30 trillion yuan.

Sales by the top 100 developers fell 44.9 per cent year-on-year to 312.2 billion yuan in the first four months of the year, according to data from the China Real Estate Information Corporation.

For now, some of Guangzhou’s prospective buyers and property agents are cashing in.

Among Ms Wang’s options is a luxury apartment in Tianhe in Guangzhou’s CBD that costs about 11 million yuan (US$1.518 million).

She will need to make a 25 per cent downpayment, which means forking out a much smaller sum upfront from 40 to 60 per cent previously. She will also pay about 100,000 yuan (US$14,000) less in interest each year for the home loan.

Ms Ann Poon, general manager of Centaline Property Guangzhou’s property department, said her team closed 10 deals by Wednesday evening.

Most buyers were looking for houses for practical reasons and not for investment, she said. One was a man renting a 60sqm apartment in Guangzhou’s CBD who decided to buy a new home for 3 million yuan.

Currently paying 6,000 yuan (US$828) a month in rent, he calculated he would need to top up an affordable sum of around 3,000 yuan for monthly mortgage payments after making the downpayment, Ms Poon said.

“It’s a good deal for renters, and we will be targeting this group for the time being,” she said.

Source: CNA/mc(cc)
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