Shanghai, February 2

China will cut the minimum downpayment for some home purchases by five percentage points, the central bank said today, as it attempts to kick-start a sluggish housing market that is both cause and effect of a broader growth slowdown.

People’s Bank of China (PBoC) said on its website the minimum deposit for first-time home buyers would fall from 25 per cent to 20 per cent. The move aimed to ‘further support reasonable housing consumption and promote the stable and healthy development of the property market’, it said.

Analysts say a slowdown in real estate, a key source of revenue for local governments in China, has been a drag on the overall economy.

The world’s second-largest economy grew 6.9 per cent in 2015, its slowest pace in 25 years. “We continue to see the GDP (gross domestic product) growth grind lower as on-going destocking in the property sector and its knock on effect on industrial and mining activities overwhelm additional policy support,” Wang Tao, head of the China economic research at UBS, said in a report last week.

The downpayment cut does not apply to cities which have purchase restrictions in place, the PBoC said, such as Shanghai and Beijing.

The minimum downpayment for purchases of second homes is set at 30 per cent, the central bank said, down from 40 per cent.

New home prices rose in January for the sixth straight month, a survey showed on Monday, positive news for the key sector following a series of stimulus measures aimed at boosting lending.

The average price of a new home in China’s 100 major cities rose 0.42 per cent month-on-month in January to 11,026 yuan ($1,675) per square metre, the China Index Academy said, a slight easing from December’s 0.74 per cent increase.