China eases housing investment rules again to boost economy

[August 31, 2015]  BEIJING (Reuters) - China relaxed its housing investment rules for the second time in two weeks on Monday by slashing the downpayment level for most second-home buyers, as authorities try to jumpstart growth in a part of the economy that is showing rare signs of buoyancy.

The minimum downpayment level for those buying their second homes and funding their purchases with their housing provident funds will be lowered to 20 percent from 30 percent in most cities, the Ministry of Housing and Urban-Rural Development said.

The change, effective Sept. 1, applies to all cities except Beijing, Shanghai, Shenzhen and Guangzhou, and only covers buyers with no outstanding mortgages. Governments in the excluded cities can set their own minimum level of downpayment, subject to the central government's approval.

The change comes just days after China loosened rules for foreigners to buy real estate across the country, capitalizing on signs that the housing market may be stabilizing when the rest of the Chinese economy is still struggling.

Worth around 15 percent of the world's second-largest economy, China's property market affects demand in as many as 40 other industries from cement to furniture.

Helped in part by five interest rate cuts since November, the Chinese housing market has steadied in recent months. Prices rose for a third consecutive month in July as sales and market sentiment improved.

Yet many analysts do not believe China's property market is set for a strong rebound due to a large oversupply of homes in many cities outside Beijing, Shanghai, Shenzhen and Guangdong.

It is also unclear if China will succeed in whetting foreign appetite for property as the country's stuttering economy has prompted some investors to pull their funds from the country.

A shock devaluation in the yuan in early August has also fed speculation that the currency could fall further, something authorities deny but which could fuel capital outflows.

Persistent economic weakness and a 30 percent plunge in share prices in the early summer have stoked concerns that the economy could suffer a hard landing that will hammer global growth and send global markets into a tailspin.

Many expect China's economy to expand around 7 percent this year, a rate that will be its worst in a quarter of a century and which some believe is an overstatement of the true growth rate.

However, many analysts believe the economy may be expanding at a rate well under 7 percent, as lackluster growth in exports, manufacturing and domestic investment hurt activity.

(Reporting by Winni Zhou and Koh Gui Qing; Editing by Clarence Fernandez and Nick Macfie)

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