China to subsidize mortgages for first-time homebuyers

A housing estate is under construction in Beijing in this file photo. Photos by Xinhua

China's Ministry of Finance, the People's Bank of China, and the National Financial Regulatory Administration jointly announced yesterday that the country will offer interest subsidies on housing loans starting Oct. 1 for first-time homebuyers.

The policy will be effective for one year, with authorities providing an annualized subsidy of 1 percentage point for eligible homebuyers for up to five years.

To qualify for the subsidies, first-time buyers must purchase homes with a floor area of 120 square meters or less, and the total price must not exceed 1.5 million yuan (US$222,516).

Under this policy, homebuyers can enjoy subsidies on up to 1 million yuan of loans, which translates to nearly 50,000 yuan in saved interest on a long-term 1-million-yuan mortgage.

The policy is designed to help lower-income families reduce their monthly mortgage burdens, the authorities said.

Given the restrictions on the total floor space and cost of newly purchased homes, the new policy will have little to no impact on first-tier cities like Shenzhen, where homes costing less than 1.5 million yuan are rarely found.

Prospective homebuyers are seen at a sales center for a new housing estate in Beijing.

Nevertheless, local authorities in more than 20 Chinese cities have already published similar policies to perk up their real estate markets. For instance, Nanjing in Jiangsu Province began offering interest subsidies of 1% on housing loans in March for those who swap their old homes for new ones. 

In May, Guangzhou adopted interest subsidies of 1% on loans for homebuyers who swap their old homes for new ones, with a maximum subsidy of 30,000 yuan per home. Shanghai offered similar subsidies in August, with a maximum subsidy of 50,000 yuan.

Data released by the National Bureau of Statistics earlier this month showed narrower year-on-year declines in home prices across major Chinese cities in August, pointing to further signs of bottoming out.