China’s property market is currently going through a difficult phase with a significant drop in number of property buyers. The situation has become so dire that the government has been forced to take major steps to save the property market. In a move to better the situation, the government of China has announced its largest-ever ‘stimulus package’ package on mortgages worth 5.3 trillion dollars (approximately Rs 44.27 lakh crore).
Adding to it, the down payments on the existing loans are also set to decrease. Pan Gongsheng, Governor of the People’s Bank of China mentioned that the interest rates on the existing mortgages are set to be reduced to 0.5 per cent. These decisions came up after organisations like UBS Group AG, Bank Of America and JPMorgan Chase & Co expressed their doubts mentioning that the country will not be able to meet its growth target this year.
Those with existing loans presently pay an interest of 4 per cent. However, people who are planning to take loans to buy property will have to pay an interest rate of 3.2 per cent. Even if someone plans to buy a second home on loan, then the person has to pay an interest of just 3.5 per cent. The government’s large-scale interest rate cut aims to bridge the gap between old and new interest rates. This reduction is set to ease the mortgage burden on more than 150 million people (15 crore). It should be noted that the home loan interest rate reached an all-time low following this announcement.
Speaking on this development Yan Yuejin vice president of Shanghai E-house’s research arm, “This package is China’s biggest and widest supporting measures on home loans till date, as it covers both new home-buying and outstanding purchases.”
Despite the interest rate cuts, China’s property market has not shown signs of recovery. This is reportedly the fourth consecutive year the property sector has witnessed such a drop in the number of buyers. According to some reports, some property sellers are fearing that the house prices may drop even further.
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