Chinese city cuts home down-payment ratio in bid to boost demand

The eastern Chinese city of Heze is allowing some home buyers to pay lower down-payments for their purchases, two sources with direct knowledge of the matter said, in the first reported case of a city easing the borrowing rule.

Regulatory curbs on borrowing have driven China's property sector -- a major economic growth driver -- into a sharp downturn, squeezing the cash-flow of many developers and chilling buyer sentiment. Financial markets are waiting to see if restrictions will be eased soon to revive activity.

For buyers with no mortgage history, the minimum down-payment ratio has been cut to 20% from 30%, while the ratio for buyers with one home has been lowered to 25%, with bank loans accounting for the rest of the payment, the sources said late on Thursday.

Local media reported that some banks had agreed to extend more loans in view of the lower down-payment ratio, in a move to help bolster demand.

"As far as I know, this is the first city cutting the down-payment ratio for mortgage loans," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "It signals policy easing in the property sector may have entered a new phase." The housing regulator of Heze, a city of 8.79 million people in eastern Shandong province, has not officially announced the move. It did not immediately respond to a Reuters request for comment.

Since late 2021, several cities have taken measures to bolster local property markets such as increasing mortgage loans, lowering mortgage rates and providing subsidies for home purchases.

Earlier this month, China also moved to give real estate firms easier access to presale proceeds from residential projects in escrow accounts, to alleviate their funding stress.

The easing measures came ahead of China's annual parliamentary meeting as well as the gathering of the largely ceremonial advisory body, the Chinese People's Political Consultative Conference, in March.

"After the Two Sessions in early March, we think more local governments (especially higher-tier cities) will roll out demand-side easing," said JP Morgan in a note.

(Reporting by Shuyan Wang, Liangping Gao and Ryan Woo; editing by Richard Pullin)