A major city in China has eased a key restriction on housing purchases, paving the way for more cities to follow suit and prop up demand as the property slump in the world’s second-biggest economy drags on.
(Bloomberg) — A major city in China has eased a key restriction on housing purchases, paving the way for more cities to follow suit and prop up demand as the property slump in the world’s second-biggest economy drags on.
Wuhan, China’s eighth-most populous city, will allow local families to buy an additional home in areas with purchasing caps, according to a local government statement. The city in central China where Covid-19 cases first emerged more than three years ago, supports “reasonable” home purchases, according to the statement.
With a population of 13 million, Wuhan is the first major city to clearly allow homeowners to buy additional units, easing a ban put in place in many cities to prevent speculation.
Local authorities have in recent months been stepping up efforts to revive demand, including by cutting mortgage rates and easing down-payment requirements. Even with the measures, home sales continued to slump in January. The 100 biggest real estate developers saw new home sales drop by a third from a year earlier, according to preliminary data from China Real Estate Information Corp.
In a 16-point statement, the Wuhan government said it would modify the restriction on homebuyer eligibility based on home prices and inventory, drawing from the central bank, which is allowing cities to remove a mortgage rate floor.
Read More: China Extends Easing of Mortgage Rates on First Home Purchases
Last month, the central bank said cities are eligible to remove minimum interest rates on loans for first home purchases if prices drop month-on-month and year-on-year for three consecutive months.
“Restrictions centering around how many apartments a family can buy used to be the least flexible policy lever in China,” said Yan Yuejin, research director at E-house China Research and Development Institute. “The easing by the Wuhan government has strong implications, showing that even such hard rules could be made more flexible.”
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