Shenzhen has reduced the interest rates for housing provident fund loans, resulting in savings for homebuyers, Shenzhen Economic Daily reported May 19, citing officials from the Shenzhen Municipal Housing and Construction Bureau.

For loans issued before May 18, the adjusted rates will take effect July 1. For loans applied for on or after May 18, the new rates are effective immediately.

The People’s Bank of China (PBOC) announced May 17 that, effective May 18, 2024, individual housing provident fund loan interest rates will be reduced by 0.25 percentage points. First-time housing provident fund loan rates will be 2.35% for loans of five years or less and 2.85% for loans over five years. Second-time housing provident fund loan rates will be no less than 2.775% for loans of five years or less and 3.325% for loans over five years.

Taking a 1 million yuan (US$140,800), 30-year first-time housing provident fund loan as an example, the monthly payment will

 decrease from 4,270.16 yuan to 4,135.57 yuan, a reduction of about 135 yuan. Over the loan’s term, total interest savings will amount to 48,500 yuan. This change will provide financial relief for homebuyers in Shenzhen.

On May 17, the PBOC and the National Financial Regulatory Administration issued a notice lowering the minimum down payment ratios for first-time and second-time home loans to 15% and 25%, respectively. Additionally, the PBOC removed the national lower limit on interest rates for first-time and second-time home loans.

Previously, at the end of August 2023, the PBOC and the National Financial Regulatory Administration had set the minimum down payment ratios for first-time and second-time home loans to 20% and 30%, respectively. The latest adjustment further reduces these thresholds.

The PBOC has now tasked provincial branches with guiding market interest rate pricing mechanisms to independently decide whether to set lower limits on commercial individual housing loan rates based on local real estate market conditions and government control requirements. Banking institutions are advised to determine specific interest rates for each loan rationally by considering the limits set by these mechanisms, the institution’s operating conditions, and customer risk profiles.

The PBOC also announced the establishment of a 300 billion yuan relending facility for affordable housing to encourage and guide financial institutions to support local State-owned enterprises in acquiring unsold completed commercial housing at appropriate prices — to be used as either affordable housing for resales or rental — in accordance with market-oriented and law-based principles.

In another development, at a news conference in Beijing on Friday, it was announced that new measures will be introduced to support local governments to recall or buy back unused residential land parcels held by property developers to help relieve their financial stress. Governments in cities with excess home inventories can organize local State-owned enterprises to buy unsold houses at appropriate prices and convert them into affordable housing, it said.

Following recent policy changes, there has been a notable increase in both inquiries and transactions in Shenzhen’s real estate market.

At a new housing estate in Longhua District, a continuous stream of potential buyers was observed. A sales representative surnamed Wu reported being overwhelmed, handling over a dozen groups of clients in a single day over the weekend.

Zheng Shulun, president of Centaline Property South China, believes the new measures will boost market confidence in the short term, prompting hesitant buyers to enter the market more quickly. In the long term, the measures will ease the process of obtaining purchasing qualifications, potentially leading to a significant increase in housing demand. As transaction volumes rise, housing prices are expected to gradually stabilize and bottom out, Zheng said.