Can China’s stimulus bazooka repair confidence, income deficit in housing market?
Fitch analyst sees more support measures next quarter to ensure Beijing’s latest stimulus bazooka achieves its aims
What Beijing cannot fix quickly enough are the cracks developed since the fateful “three red lines” policy in August 2020. The calamity brought by the ensuing Covid-19 pandemic has also eroded home prices, disposable income and above all, confidence among homebuyers.
That puts Kang Chao, a 33-year-old insurance professional in Changsha in southern Hunan province, in a dilemma. The People’s Bank of China (PBOC)’s decision to cut down payments on second homes and existing mortgage rates is “very attractive,” he said. Yet, his existing finances make it almost impossible to start looking for a new home.
“My income has declined by almost 30 per cent since last year because of my company’s struggles, so my spending power has dropped quite a bit,” he said. Lower mortgage costs are not freeing enough extra cash to buy another home, he added.
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Kang, who already owns two flats in Changsha, is trying to sell one to ease his mortgage burden. With home prices falling in August by the most in nine years, and demand remaining weak, he is struggling to find a buyer. More needs to be done, according to analysts at S&P Global Ratings and Fitch.
The PBOC on Tuesday asked lenders to cut mortgage rates by half a point, while the down payment for second-home purchase will fall to 15 per cent from 25 per cent. In all, some 150 million homeowners could save 150 billion yuan (US$21.4 billion) annually, Governor Pan Gongsheng said.
