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China to Slash Down Minimum Home Down Payment to Stimulate Market

China to Slash Down Minimum Home Down payment to Stimulate MarketChina said that it would be cutting down the minimum down payment for first time home buyers in several cities which is stepping up the support in the sluggish property market and stumbling economy. This was the second measure in the two days that was intended to fire up consumption after a government decision to half the tax on the sale of small homes. the Central Bank and banking regulator stated that they will lower minimum down payments for first time home buyers down to 25 percent compared to the previous amount of 30 percent in cities that doesn’t have any restriction on home purchases.

The property sector hit a weak patch in the past couple of years and paired with slowing sales that led to an overhang of unsold apartments and affecting demand from steel to home appliances to furniture. The relaxed ruling will help but the impact is not immediate since the main reason for high inventory in several cities is bad location and transportation. The new ruling will likely stimulate the demand from buyers that are observing on the sidelines and are just waiting to get back into the market. The property sector accounts for 15 percent of the gross domestic product if China and signs of improvement will relieve the pressure in the economy since it is expected to expand this year even it at the slowest pace.

Home prices increases for the fourth consecutive time in August as sales and market sentiment has improved, a light in an other wise gloomy economic outlook. Analysts are not expecting a full turnaround on the property market soon, since the huge number of unsold homes is discouraging construction and investment in the biggest cities. Home sales and prices picked up in the past couple of months with an annual growth in property investment in the first eight months slowed to 3.5 percent as new construction started has plunged by 17 percent.

The move is part of the latest step that was aimed to support a sector which is pivotal to the economic growth and by having a low down payment requirement doesn’t apply in certain cities since they have imposed restrictions on buying new homes.



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