Subsidies for homebuyers, bank lending & more: China's roadmap to boost property sectors

Skyline of Shanghai, China (Photo: Reuters).

China implemented fresh measures on Tuesday to support its economy and struggling property sector, as pressure builds ahead of the year-end deadline for meeting the government's growth target.The measures include encouraging targeted bank lending and introducing new subsidies towards homebuyers' mortgage interest payments.China’s central bank said it would cut the interest rate on its "pledged supplementary lending" facility, known as PSL, by a quarter of a percentage point, taking the one-year rate to 1.5 per cent.PSL is low-cost funding that the central bank provides to major state policy banks in order to back state and public projects.By reducing the rate, the bank said, it hopes to give lenders stronger incentives and to better "serve national strategies".The central bank will also raise the quota for relending aimed at technological innovation by 200 billion yuan (about USD 30 billion), lifting the total to 1.4 trillion yuan (USD 208 billion).Separately, the ministry of finance announced new mortgage interest subsidies for homebuyers.Starting in October, eligible first-time buyers can receive a subsidy equivalent to an annualised rate of one percentage point on the mortgage principal, for up to five years.

To be eligible, the property must have a floor area of no more than 120 square metres (1,292 square feet) and a price of no more than 1.5 million yuan (USD 224,000).Gary Ng, a senior economist for Asia Pacific at the French bank Natixis, told Reuters that Tuesday's measures represent "a targeted approach with lower funding costs to support selected sectors through policy banks and the real estate sector".For the property market, Ng added, they aim "to support housing demand in lower-tier cities, which are still facing severe headwinds".