Shanghai Lowers Minimum Down Payment, Widens Fund Usage to Boost Property Market

Shanghai released a set of new property trading policies on Thursday to further stimulate demand for home buying.

The policies, including lowered minimum down payment ratio, expanded usage of housing provident fund and more convenient access to use it, will take effect from Friday.

Under the new rules, the minimum down payment ratio for buyers of a second home in the Outer Ring area is lowered to at least 15 percent from the previous 20 percent, while those buying a second home within the Outer Ring area still have to pay a 25 percent minimum down payment.

First-time home buyers continue to follow the 15 percent least requirement for down payment.

Meanwhile, the provident fund, which is set aside for home buying, can be withdrawn once in each calendar year. Previously, people could only allocate the fund once every five years. Also, the provident fund can be used as the down payment for new homes, which was earlier prohibited, and it won't affect the quota amount allowed for provident fund loan.

Besides, the city will expand the property trade-in programs by offering a total of 200 million yuan (US$30 million) for those selling an existing home in downtown for a new home in the Outer Ring area. Each buyer can get a subsidy of 50,000 yuan until the capital pool is exhausted.

"These policies have a clear target, which is to stimulate the demand of wavering home buyers, who are still shy of the minimun down payment or need a further push for a decision," said Yan Yuejin, deputy director at E-house China R&D Institute.

Shanghai relaxed property trading policies in February but remained one of the few Chinese mainland cities to still impose restrictions on home buying. Starting from February, non-locals holding a residence permit for more than five years or paying taxes in Shanghai for over one year could buy a home in designated areas of the city. Also, the city increased the maximum housing provident fund loan limit and expanded the scope of property tax exemptions.

According to the National Bureau of Statistics, the index for existing home sales in Shanghai in the first seven months of the year decreased 4.9 points from a year earlier, although it rose to a five-year high in March after the city relaxed purchase restrictions for non-local residents. In terms of new homes, the sales index gained 3.6 points, mainly bolstered by premium projects in downtown.