Central bank lowers down payments for first-time buyers for the second time in five months - from 25 percent to 20 percent

In a bid to revive China's urban housing market, the central bank lowered the minimum down payment for first-time homebuyers on Feb 2 for the second time in less than five months.

The People's Bank of China and the China Banking Regulatory Commission announced that the down payments for first-time homebuyers would be reduced from 25 percent to 20 percent. Economists describe the move as "pointing to the healthy growth of the market".

Unsold homes in China rose by 11.2 percent last year to a total of 52 million square meters, according to the National Bureau of Statistics.

In October, China lowered first-time homebuyers' minimum down payment requirement from 30 percent - at which it had stood since 2010 - to 25 percent.

Zhao Xijun, deputy dean of the School of Finance at Renmin University of China in Beijing, says the most recent down payment adjustment would help China reduce the inventory of unsold housing at a time of general economic slowdown and lackluster business.

In tandem with the reduction for first-time buyers, minimum down payments required for second homes will fall from 40 percent to 30 percent, a joint statement by the central bank and the CBRC said.

However, the revised percentages do not apply in first-tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou, where heavy restrictions against speculative home purchases remain in place.

Industry specialists say the lower down payments would benefit the housing market in small towns near large cities.

It could cause an immediate surge in sales in places like Langfang and Yanjiao in Hebei province, both of which are only about an hour's drive from Beijing, says Yan Yuejin, a researcher at E-house China R&D Institute.

In other small cities, Yan says, homebuyers' interest could remain low because business in general has experienced no major growth over the past few years.

However, Zhang Dawei, chief market analyst at Zhongyuan Real Estate Co, argues that the timing of the rule change is important. Coming right before Chinese New Year's Day on Feb 8, and with many people going home for family reunions, the new policy could arouse people's interest in buying real estate in their hometowns, Zhang says.

China Index Academy, a private-sector research firm, says the average new home price in the country's 100 major cities rose in January by 0.42 percent month-on-month to 11,026 yuan ($1,676; 1,536 euros) per square meter.

Contact the writers through wangyanfei@chinadaily.com.cn