ZHOU BINGGUO expected to find a few buyers for the 20 apartments for sale next to Beijing’s Central Business District in the first week of October, he said. It was the Golden Week holiday, traditionally a peak time for homes sales, and China had just eased mortgage restrictions.

    “Quite a few people visited, but nobody bought,” said Zhou, a consultant in the asset management department of CBD Private Castle, a residential project. “People are still waiting for prices to fall.”

    China is lowering down payment requirements and discounting mortgages as declining housing sales put a drag on the economy. After four years of government restrictions to cool housing prices that had tripled since 2000, the central bank is reversing course, making it easier for homeowners to buy second properties. They are not likely to get back into the market, several analysts said, until prices become more affordable.

    “The property downturn will continue as buyers stay on the sidelines in anticipation of further price declines,” said Bei Fu, a Hong Kong-based credit analyst at Standard & Poor’s. “Longer term, the central bank’s latest move is a big step forward. It will allow more buyers to qualify for preferential mortgage rules and should help to release pent-up demand.”

    Premier Li Keqiang is trying to prevent economic growth this year from drifting too far below the government’s 7.5 percent target, already the slowest pace since 1990. UBS AG estimates that real estate, including goods such as electric machinery, chemicals and metals used in construction, accounts for more than a quarter of final demand in the economy.

    Sales fall

    New-home sales slumped 11 percent to 3.43 trillion yuan (US$563 billion) in the first eight months of 2014 as the government curbed credit, reversing a 27 percent jump last year, according to the National Bureau of Statistics. The average new-home price in 100 cities tracked by SouFun Holdings Ltd. fell 0.9 percent in September from August, dropping for the fifth consecutive month. The price rose 1.1 percent from a year earlier, narrowing for a ninth month in a row.

    Weakening demand in a property market that “has lost power” will dim China’s economic prospects, dragging growth lower in the world’s second-largest economy, Li Daokui, a former central bank adviser, said Oct. 12 in Beijing. Housing “remains the key downside risk to the economy,” Moody’s Analytics economist Alaistair Chan wrote in an Oct. 9 report.

    The new rules give homeowners who have paid off their loans and want a second property the same advantages as first-time buyers, the People’s Bank of China said Sept. 30.

    No hurry

    Lenders can now give these second-home buyers a mortgage discount of as much as 30 percent of the central bank’s benchmark rate. And buyers will need to provide a down payment of only 30 percent, a drop from the government’s earlier 60 percent requirement, which Beijing, Shanghai, Guangzhou and Shenzhen increased to 70 percent last year to curb soaring prices. The central bank also eased a ban on mortgages for people without home loan debt who want to buy a third home, allowing banks determine down payments and rates.

    The central bank’s move comes after all but five of the 46 cities that imposed home-purchase restrictions since 2010 eased or removed such limits in recent months.

    “Most people are not in a hurry to buy,” Du Jinsong, Hong Kong-based property analyst at Credit Suisse Group AG, wrote in a report Oct. 2, after analysts talked with industry experts, property sales agents, homebuyers and investors. “As one person put it, ‘The better deal for mortgage is just announced, so it won’t go away any time soon — I can afford to wait.’”

    “The wait-and-see sentiment is still prevalent” among buyers, said Donald Yu, Shenzhen-based analyst at Guotai Junan Securities Co. Developers “still feel that the situation hasn’t reversed, and it’s still best to keep prices stable,” he said. “They will still moderately lower prices, but not as steeply as before.”

    Lenders probably won’t significantly cut rates because profits are their primary goal, Moody’s Investors Service analysts led by London-based Marie Diron wrote in an Oct. 6 report. Mortgages typically generate lower returns than other loans, Essence Securities Co.’s Beijing-based analysts led by Wan Zhi wrote in a Sept. 23 report.

    Smaller banks have trimmed their mortgage lending after seeing a rise in funding costs amid tight liquidity since mid-2013. Ping An Bank Co.’s home mortgage lending dropped by 1.3 percentage points in the first half of this year to 6.4 percent of its loan book, as the Shenzhen-based lender reduced such “low-risk, low-yield” loans, according to its semiannual report.(SD-Agencies)