Shanghai and Beijing Photo:VCG

Beijing and Shanghai, two mega cities in the world's second largest economy, have reportedly moved to cut their mortgage rates by 15 basis points (bps) on Monday amid a nationwide policy fine-tune in the real-estate market as part of a broader pro-growth push.

The adjustment, which is relatively smaller compared with other counterparts across the country, signals policymakers' reiteration for "housing is for living, not speculation," meanwhile further unleashing inelastic housing demand in the two cities that have been under a tough fight against the Omicron virus, analysts said.

Among them, interest rate of Beijing's first home loan has dropped from 5.15 percent to 5 percent; interest rate floors on mortgage lending for second-time homebuyers declined from 5.65 percent to 5.5 percent. Shanghai's first home loan interest rate fell from 4.95 percent to 4.8 percent; interest rate for second-home buyers fell from 5.65 percent to 5.5 percent.

As the cities are strongly affected by the epidemic, the reduction of mortgage interest rates will help boost the property market. The policy will be favorable for the reduction of the purchase cost for those who want to improve their living situation as well as first-home buyers, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Monday.

New home sales in May are expected to fall by 14 percent in Beijing and 96 percent in Shanghai, indicating greater downward pressure, according to Yan, citing the disruption of the epidemic, noting this could bring more uncertain effects for the two cities.

Li Changan, professor of the Academy of China Open Economy Studies at the University of International Business and Economics, told the Global Times on Sunday that a relaxation of policy in the first-tier cities where gathered abundant talent and capitals, will have more immediate effect.

The move also comes one week after China's central bank and banking and insurance regulator cut interest rate floors on mortgages for first-time homebuyers by 20 basis points (bps) off the benchmark loan prime rate (LPR), culminating into a flurry of housing market-reviving moves across the country to lift up Omicron-hit economy.

Over the past week, more than 20 cities in China have moved to cut their mortgage rates to as low as 4.4 percent, the lowest level set by the central bank. First-, second- and even third-tier cities were among them, which include Guangzhou and Shenzhen in South China's Guangdong Province, North China's Tianjin Municipality, Jinan in East China's Shandong Province and Fuyang in East China's Anhui Province, a report sent to the Global Times by Shanghai-based E-house China R&D Institute showed.

Moreover, for the month, more than 56 cities have issued more than 60 policies to stabilize the property market as of May 20, and the number of real estate regulation policies throughout the year has reached 290, continuing to refresh the historical record for the same period, according to a calculation from Centaline Property, an industry research institute.

The downward adjustment will largely help to promote the stability of the real estate market, and it will also play a role in reducing the cost of buying a house. If the follow-up market pressure is still relatively large, it does not rule out the possibility that the mortgage interest rate will continue to decrease, Yan said.

Global Times