Housing agencies across China are flooded with potential home buyers after the country announced major changes to its home-buying policies on Tuesday such as lowering interest expenses for home buyers and giving them incentives for purchasing a second house.
The policy changes were announced by Pan Gongsheng, governor of China's central bank, the People's Bank of China (PBOC), at a news briefing in Beijing.
The policy shifts will see mortgage rates for existing home loans drop by an average of 0.5 percentage points to a level similar to those of newly issued housing loans.
The minimum down payment ratio for both first and second homes will be unified, with the nationwide minimum down payment ratio for second homes to be reduced from 25 percent to 15 percent, said Pan.
The move is expected to benefit 50 million households or a population of 150 million, reducing their total interest expenses by approximately 150 billion yuan (over 21 billion U.S. dollars).
Less repayment pressure has been unleashing demands in housing markets across China, with housing agencies in major cities like Beijing and Shenzhen being inundated with potential home buyers.
In south China's Shenzhen City, Guangdong Province, a home buyer surnamed Lin said she now has a housing loan interest rate of above 4.5 percent and Tuesday's news made her excited and boosted her interest in buying another house.
"The monthly repayment of our existing house has dropped and if we buy another one, we will pay two to three thousand yuan (about 290 to 400 U.S. dollars) less each month," said Lin.
Li Jingzheng, head of the Shenzhen-based housing agency, said that since Wednesday morning they have been answering questions from their customers who are interested in the details of the changed policies.
"The number of customers coming to us for online consultancy rose drastically, about 165 percent higher. The number of customers coming to our store rose by about 30 percent. We showed seven groups of customers the houses on sale this morning and in the afternoon, some of our colleagues are still busy showing customers the houses," said Li.
In Beijing, home buyer and housing agencies are keeping close attention to the potential lowering of the contractual interest rate of the mortgage rates for existing home loans.
In 2019, the PBOC required banks to use LPR as a pricing benchmark in variable rate loan contracts.
For Chinese home purchasers, their housing loan interest rates are calculated by adding or reducing percentage points from the monthly released LPR.
As Beijing's home-buying policies vary with the houses' locations and the number of the houses that one buyer owns, housing agents said the city's contractual interest rates have not settled.
"Before December last year, the housing loan interest rate in Beijing for the first-time home buyer was 55 percentage points higher than the LPR at that time and for those who want to buy a second house, the interest rate was 105 percentage points higher. Now, for home buyers who want to purchase their first house within the fifth ring road ,the interest rate is 45 percentage points lower than the current LPR and for their second house, the interest rate is five percentage lower. So, different kinds of home buyers have different interest rates. The housing loan interest rates for houses within or outside the fifth ring road and for the first and second houses are different, so, we can only know the exact interest rates after the banks release policies of their own," said Lu Zilin, a housing agent in Beijing.
China's housing agencies crowded following major changes in home-buying policies
