Guangzhou follows Shanghai, eases home curbs

Staff reporter and agencies

China's major southern city of Guangzhou has cut the downpayment ratio to as low as 15 percent for first-time buyers and removed mortgage rate floors. It is the latest top-tier city to ease property curbs following Shanghai's similar measures revealed on Monday.

The minimum downpayment ratios for second-home buyers will be lowered to 25 percent, according to a notice by the Guangzhou government yesterday. The new rule will become effective today.

This comes after Shanghai reduced downpayment ratios by 10 percentage points to a minimum of 20 percent for first-time buyers and 30 percent for second-home purchasers. Shanghai will also cut its minimum interest rates on first home mortgages to the loan prime rate minus 45 basis points, compared to LPR minus 10 basis points earlier.

Analysts including John Lam at UBS Group and Stephen Cheung at Morgan Stanley had expected other top-tier cities to follow Shanghai's lead, improving the outlook for market sentiment and sales.

Shares of Shimao (0813), which operates in big cities including Shanghai, closed 1.9 percent higher after jumping as much as 16 percent in Hong Kong yesterday.

The relaxation follows China's most forceful rescue package earlier this month, when the central bank unleashed 300 billion yuan (HK$322.6 billion) of funding to help local governments buy unsold homes. Officials are trying to revive homebuyer confidence, which has been crushed by falling prices, unfinished apartments, and job insecurity.

The central government recently allowed local authorities to cut the minimum downpayment ratio and make their own decisions for mortgage rates.

UBS looks bullish on KE Holdings (2423) as the investment bank believes the online property brokerage platform will benefit from top cities' property easing measures in China, while the bank's top picks for mainland property developers are China Resources Land (1109), Longfor (0960), and Yuexiu Property (0123).

Separately, China Resources Land denied returning a commercial site in Hangzhou, adding that the project continues to progress.