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Guangzhou Initiates Mortgage Regulation Easing to Revive Real Estate Sector

In a strategic move aimed at rejuvenating the real estate sector and bolstering a slowing economy, Guangzhou has emerged as the pioneering Chinese metropolis to relax its housing loan regulations. This significant decision comes amidst China’s intensified efforts to steer its beleaguered real estate industry toward recovery.

A reliable source disclosed on Tuesday that the decision to ease mortgage regulations was prompted by the propensity of some Chinese government banks to reduce interest rates on housing loans. This impending rate cut will mark the first of its kind since the global financial crisis, signifying a momentous shift.

China’s motivation behind the move is to inject fresh vitality into consumer demand within the real estate sector. Historically a bedrock of economic growth, the sector has encountered a perceptible deceleration. Factors such as dwindling home sales and defaults by prominent real estate conglomerates have contributed to this wane in performance.

As of the end of June, China’s cumulative mortgage volume stood at an impressive 38.6 trillion yuan (equivalent to $5.29 trillion). This sizeable sum constitutes a notable 17% of the total bank loans across the nation.

The Guangzhou municipal government has underscored its intention to ease constraints on home mortgages, a policy shift aimed at facilitating enhanced credit access for first-time homebuyers. Importantly, this shift will occur irrespective of an individual’s prior credit history.

Anticipating a cascading effect, it is expected that other major Chinese cities—namely, Beijing, Shanghai, and Shenzhen—will embrace analogous measures. Concurrently, several smaller cities have also taken affirmative steps to streamline the homebuying process.

Following the announcement of these measures by the Guangzhou municipal government, the Hong Kong Stock Exchange’s Hang Seng Mainland Property Index responded with a robust 3% surge, indicative of investor optimism in the proposed policies.

The real estate sector, a significant pillar of China’s economy, accounts for nearly a quarter of its GDP. Straddled with multiple crises since 2021, concerns surrounding the sector have further intensified this month, prompted by liquidity challenges faced by real estate development giant Country Garden.

As China embarks on recalibrating its real estate landscape, the moves by Guangzhou and the anticipated ripple effect across other cities carry the potential to shape the trajectory of a sector poised for transformation amidst evolving economic dynamics.

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