Shanghai has introduced another round of measures to make it easier to purchase housing, as Chinese authorities step up efforts to shore up the country’s faltering real estate market.

With housing sales still falling despite previous measures to stimulate the market, the People’s Bank of China stepped in on May 17 to relax a series of restrictions on home buying that were originally introduced to curb speculation during the boom years.

This move gave local authorities across China the power to cut mortgage rates even further, lower minimum down payment thresholds, and scrap several other restrictions. Several Chinese provinces immediately took advantage of the new rules to slash local rates.

But Shanghai’s decision to adjust its policies is particularly noteworthy. The city of around 25 million people is the largest in China and just a few years ago its property market was red-hot, leading local authorities to introduce some of the toughest home buying rules in the country.

On Monday, several bodies in Shanghai simultaneously announced a raft of measures to lower those restrictions. The minimum down payment for a first home has dropped from 30% to 20%, while those buying a second home in a downtown area will now only have to pay 30% rather than 40% upfront.

Commercial mortgage rates will be lowered from over 4% to between 3.5% and 3.9%. Non-Shanghai residents can now buy property after paying social insurance for three — rather than five — consecutive years. Restrictions on divorcees buying homes have been abolished, and families with multiple children can now purchase an extra home.

Yan Yuejin, a research director at the E-House China R&D Institute in Shanghai, said that he expects the new measures to help bolster demand for housing. “They are likely to contribute to stabilizing market expectations and boost market confidence,” he told Sixth Tone.

The measures come at a crucial moment for China’s real estate market, which directly accounted for 5.8% of the country’s gross domestic product in 2023. Since 2021, a debt crisis among Chinese developers has led to construction being halted on millions of homes and shaken the confidence of investors and buyers alike.

Chinese authorities rolled out a series of stimulus policies last year, but so far the measures have had limited effect. During the first four months of 2024, sales of new homes fell 28.3% compared with the same period last year, according to government data. Real estate investment dipped 9.8% year over year.

The country is also taking steps to reduce its massive stock of empty apartments, with the government estimating that over 745 million square meters of commercial housing remains unsold. More than 70 cities have reportedly introduced new “trade-in schemes” that will allow buyers of new homes to offload their hard-to-sell old properties to developers or state-backed investment funds.

The latest rules introduced by the People’s Bank of China on May 17 allowed local authorities to slash minimum down payment thresholds for first home purchases to as low as 15%. The bank has also scrapped minimum mortgage rates for first and second home purchases.

Many Chinese provinces have already lowered their restrictions to the new national minimum. Though Shanghai has also cut its rates, it remains one of the few places in China — along with fellow megacities such as Beijing, Guangzhou, and Shenzhen — that hasn’t yet dropped its purchase restrictions to the lowest level allowed nationally.

Cui Lifu, a manager of a real estate brokerage owned by the Chinese firm Homelink in downtown Shanghai, said he had seen an uptick in the number of clients coming for consultations and house viewings over the past few months.

“But many have been holding off on a decision as they wait for even more advantageous policies,” he said. “Now, it seems like the right time has come.”

The office received another flurry of calls from clients inquiring about purchasing homes after the policy announcements yesterday, said Cui.

Additional reporting: Ding Xiaoyan.

(Header image: VCG)