China’s Zhengzhou city launches property support measures

11:57 pm Thursday, August 03rd, 2023

BEIJING (Reuters) – China’s Zhengzhou city has launched measures to support its property market, including easing home resale restrictions, in what analysts said were the first such moves by a big city heeding signals from policymakers.

The measures by the capital of China’s central Henan province included reductions on mortgage rates and down payment ratios, cuts in housing transaction taxes, and home buying subsidies for families with more than one child, according to rules issued by the Zhengzhou housing regulator late on Thursday.

While it was early to gauge the impact of the support steps on the city of more than 12.8 million people, it is nevertheless a positive sign for the market, said analysts.

“Zhengzhou’s property easing measures will most likely be warmly welcomed by markets, and we expect other tier-2 cities and even tier-1 cities to follow,” said Nomura in a research note on Friday.

But the move also raised concerns, said the brokerage.

“We are concerned that as big cities lift local property restrictions, it will drain up demand in low tier cities, which account for 70% of national new home sales volume and are the real drivers of commodity demand and construction activity,” said Nomura.

“We are also concerned that merely easing restrictions on existing home sales without lifting restrictions on home purchase may add supply and depress home prices.”

On Thursday, China’s central bank governor pledged to guide more financial resources towards private firms including property.

Demand for the property sector, once a pillar of economic growth, has remained weak in recent weeks – property sales between May and June showed the largest monthly drop this year, based on sales by floor area.

The Politburo, a top decision-making body of the ruling Communist Party, said last month it is necessary to adapt to significant changes in market supply and demand and optimise property policies in a timely manner.

(Reporting by Liangping Gao and Ryan Woo; Editing by Himani Sarkar and Muralikumar Anantharaman)