Cranes are seen at a construction site of a housing complex in Beijing. Photo: VCG

China on Thursday unveiled a new credit policy to promote urban housing sales, allowing cities where home prices see steep drops in three consecutive months to reduce mortgage rates.

Cities may maintain, lower or cancel the lower limit of first-home benchmark loan rates in stages, if sales prices of newly built commercial housing have declined for three consecutive months both month-on-month and year-on-year, according to a joint statement issued by China's central bank and the China Banking and Insurance Regulatory Commission.

A floating housing loan interest rate that is linked to new housing prices will help local authorities to scientifically evaluate the changes in the sales price of local housing and support inelastic demand in the market, the statement said.

It will also be conductive to forming a long-term mechanism to support the sound and stable operation of the country's real estate market, read the statement.

China's home prices fell at a faster pace in December. Home prices in 100 largest cities fell for the sixth month in a row, declining 0.08 percent from the previous month after falling 0.06 percent in November, according to the survey by China Index Academy, one of the country's largest independent real estate research firms.

According to the Global Times' calculation, 38 cities, including Wuhan in Central China's Hubei Province, North China's Tianjin, and Zhengzhou in Central China's Henan Province have seen three months of consecutive declines in home prices.

Each city can further lower the floor mortgage rates according to the performance of local real estate market, and can set rates lower than the average level of the industry, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Thursday.

Yan said that the rate can be lowered to 3-3.5 percent from the current 4 percent.

Yan noted the new policy also signaled that the Chinese central government's support to the real estate market is set to continue, and the central bank will use more policy tools to support property recovery in 2023.

Minister of Housing and Urban-Rural Development Ni Hong on Thursday vowed to make further efforts to resolve the risks faced by real estate developers, improve housing construction standards, and push forward the completion of stalled apartment buildings. 

"I'm still confident in seeing the real estate market stabilize and recover in 2023," Ni said.

The latest effort also comes as China has ramped up support for the industry in recent months, launching a slew of measures including lifting a ban on issuing bonds and equity offerings for developers, and meeting their reasonable financing needs.

In December, the office of the Central Committee for Financial and Economic Affairs said that China needs to fully recognize the importance of the real estate sector and do more to propel housing spending.

The country should focus on improving expectations, expanding market demand and supporting the demand for housing improvement, and abide by the principle of "houses are for living in, not for speculation," the office said.

Global Times