China has cut its minimum level of deposit for second homes.
Along with China’s ministry of finance and state administration of taxation, the country’s central bank, the People’s Bank of China, said the level would be cut from 60% to 40%.
The decision reverses past attempts to control prices in the country’s residential sector as it seeks to boost the economy.
Moody’s Investors Service said the move to ease mortgage-lending conditions and relax tax rules was “credit positive” for China’s property sector.
The ratings agency said the move would support demand and alleviate pressure on property sales.
The moves follow weak January and February sales, which fell by 16.7% year over year.
Moody’s said China’s housing prices remained under pressure in early 2015 due to a high level of housing inventory.
Moody’s vice-president and senior analyst Franco Leung said the changes would make it easier for home buyers to obtain mortgages, while lowering the cost of property transactions for borrowers who meet “certain criteria”.
“The relaxed mortgage terms and housing taxes will encourage more prospective buyers to buy homes for their own use and as an investment, and therefore support home sales,” Leung said.
While Moody’s does not expect a material, immediate increase in the growth rate of mortgage loans, the rating agency said mortgage lending would continue to grow, supporting demand.
Moody’s said developers’ pricing power was limited, as market inventory was high.
Developers with weak liquidity will take this opportunity to offer promotions in an effort to boost sales, the agency added.
The current policy relaxation will boost sales volume in the near term.
Developers with high exposure to first and second-tier cities and a focus on home upgraders will benefit most from the latest measures.
Moody’s said China Overseas Land & Investment, Longfor Properties, Gemdale Corporation, Shimao Property and KWG Property could all benefit.
