Housing regulations relaxed to spur weakening market

The Ministry of Housing and Urban-Rural Development is mulling loosening down payment restrictions in China to spur the ailing market, the Economic Observer newspaper reported on Friday, citing an insider close to the issue.

According to the report, the required down payment for first houses purchased through the housing accumulation fund system will be decreased from 30 to 20 percent. The ministry may also cut the down payment for second homes bought with a commercial mortgage to 50 percent from the current rate of between 60-70 percent, and lower the interest rate on mortgages.

The suggestions have got the nod from the Ministry of Finance and the People's Bank of China, the report said.

Chen Zhenggao, the housing minister, said during a meeting on Friday that the housing authority should raise the ceiling of the housing loans residents can apply through the housing accumulation fund, simplify the application process and further improve the efficiency of the funding system.

The housing accumulation fund is a widespread system under which between 7 and 13 percent of salaries go into a fund matched by employers, and is then used to make a down payment on a home.

"In fact, a reduced down payment on homes brought through housing accumulation fund has been adopted by many cities, and the rules on second homes, if adopted, could be a boost for the market," Zhu Zhuohan, a market analyst, told the Global Times, adding the housing market will see more deals and more investors.

Data from the National Bureau of Statistics shows that the total volume of housing sold in the first two months this year declined by 16.3 percent year-on-year.

East China's Fujian Province started to cut down payment for the housing accumulation fund to 20 percent from Friday, news portal sina.com.cn reported.

Zhu predicted more stimulation for the housing market in the coming days. "If the four big cities, Beijing, Shanghai, Guangzhou and Shenzhen loosen their housing restriction policies, combined with the former two policies, there will definitely be an increase in housing transactions," he added.