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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 for speculation," meanwhile further unleashing inelastic housing demand in the two cities that have been under a tough fight against the Omicron virus, analysts said.

As the cities are strongly affected by the lingering 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 that this could bring more uncertain effects for the two cities.

Li Changan, a professor with 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 regulators cut interest rate floors on mortgages for first-time homebuyers by 20 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, 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 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.

A cautious balance

As more cities are rolling out measures to shore up a sluggish real estate market, discussions are rising on whether the nationwide relaxation will result in a new round of speculation, which the central government has strongly prohibited over the past years.

Local authorities are also mulling and initiating a careful balance between curbing speculation and support growth amid policy-tunning.

For instance, Nanjing, the capital city of East China's Jiangsu Province suspended its policy on removing purchase restrictions on purchase of second homes on May 20. 

On Sunday, the Wuhan Economic and Technological Development Zone in Central China's Hubei Province quickly deleted a post on the social media platform Sina Weibo stating that the zone has completely removed restrictions on home purchases.

The zone's housing administration said that three areas in the zone will not restrict house purchases from Sunday, in order to support the reasonable demand of home buyers and promote the stable and healthy development of the real estate market. 

The post, which suggested that all purchase restrictions were removed, was deleted later, with a representative from the administration saying on Sunday afternoon that the message was published by the zone without permission.

Later, the Hubei Provincial Government announced via its account on Sina Weibo a detailed rule on Wuhan's real estate policy, covering relaxations for targeted groups rather than a "one size fits all" relaxation.

The hesitation indicates concerns are rising that relaxation on housing purchases may cause a new round of speculation, thus local governments halted the policies to stabilize market expectations, Yan told the Global Times, noting problems are rising in this wave of policy tuning.  

The careful wording and targeted relaxation also reflect local authorities' arduous efforts in striking a balance between prompting growth and curbing speculation - thus preventing from being "too dependent" on the real estate market, observers said.

But Li also noted it's unlikely that there will be a sudden boom in home sales, as sluggish demand remains the biggest problem for now.

Real estate agencies in Nanjing and Hangzhou told the Global Times that inquiries are on the rise after the latest round of relaxations, but said they are seeing no surge of sales for now.

Another agency in Beijing told the Global Times on Monday that home sales in Beijing are still at a lower level due to the coronavirus impact, but he expects prices to increase by around 5 percent after the latest flare-up ebbs.

Policies may still need some time to take effect, and since demand remains sluggish, it's expected that more policies ranging from tax reductions to other fiscal measures will be rolled out to lift up the withering demand, Li said.