To boost China's ailing housing sector, people's Bank of China (PBoC) has lowered deposit requirements for house buyers.
According to new rules, which was last changed back in 2010, first time home buyers can now take up mortgages with just 20% down payment, compared to 25% before. Deposit will be 30% for second time house buyers. According to PBoC, decision is taken to boost house sales.
Since mid of last year, China's house price growth has rebounded from negative zone, but that in thanks to sharp price rise in Tier 1 cities like Shanghai and Beijing. Price has remained soggy in Tier2 and Tier3 cities, while declining in Tier4 cities. This is PBoC's bid to boost demand in lower Tier cities. This new measure won't apply to Tier 1 cities like Beijing and Shanghai.
This adds to series of measure taken up by PBoC to boost growth. Today's move can be seen as effort to support the over-leveraged real estate segment, at a time, when their exposure to Dollar loans amid unsold properties giving rise to defaults.
