China is considering a fresh round of property-market stimulus aimed at halting a prolonged downturn that policymakers fear could spill over into the broader financial system, according to people familiar with ongoing internal discussions.
Officials at multiple agencies, including the Ministry of Housing and Urban-Rural Development, are evaluating several policy options designed to reignite homebuying demand. Among the proposals under review is the introduction of nationwide mortgage subsidies for first-time buyers, the people said, requesting anonymity because the talks are private.
Other measures being weighed include expanding income-tax rebates for mortgage holders and cutting home transaction fees, one person said.
Deliberations have been underway since at least the third quarter as sales, prices, and investment in the property sector all deteriorated more sharply than expected. While policymakers broadly agree that support needs to be stepped up, the precise timing and final composition of the package remain uncertain.
Chinese developer shares briefly rallied on the news, with a key sector index climbing as much as 3.3 percent, on track for its biggest gain in two months.
Beijing has spent the past year attempting to stabilize the country’s four-year property downturn, which has eroded household wealth, undermined consumer confidence, and dragged on employment. Although a wave of support measures last year briefly lifted activity, momentum quickly faded. Home sales have been falling since the second quarter, and fixed-asset investment in real estate collapsed in October.
The deepening slump is already stressing banks. Fitch Ratings warned last month that weakening household repayment capacity, and the deteriorating outlook for the sector, could worsen lenders’ asset quality in 2025. Nonperforming loans at Chinese banks hit a record ¥3.5 trillion ($492 billion) at the end of September.
One core element of the emerging plan would subsidize interest payments on new first-home mortgages, a move aimed at coaxing wary buyers back into a falling market. But analysts question whether modest financial incentives can overcome more fundamental issues.
Average mortgage rates for first-home purchases in 42 major cities have remained around 3.06 percent in recent months, only slightly above last October’s record low of 3.05 percent, when Beijing launched a previous stimulus package.
A similar interest-subsidy scheme for consumer loans was introduced in September, under which households receive a 1 percentage-point interest waiver subject to loan-size caps.
Calls for stronger intervention have intensified after earlier efforts, including lowering down-payment thresholds, cutting mortgage rates, and easing rules on multiple purchases, failed to stabilize demand. Beijing, Shanghai, and Shenzhen relaxed homebuying requirements in suburban districts during the third quarter, yet both new and second-hand homes recorded their steepest price declines in at least a year in October.
At the same time, households remain reluctant to take on new debt. Residential mortgage balances fell in both the second and third quarters, dropping to 37.4 trillion yuan, 3.9 percent below their early-2023 peak, as consumers continue to deleverage amid weak income expectations and rising economic uncertainty.
Last year, authorities scrapped the nationwide mortgage-rate floor for individual borrowers, giving local branches of the central bank discretion to decide whether floors were needed regionally. But the policy’s impact has been limited by banks’ shrinking profitability and rising credit risk. Lenders’ net interest margin, a key measure of bank earnings, fell to 1.42 percent at the end of September, far below the 1.8 percent level traditionally seen as necessary to maintain healthy profitability.
With banks reluctant to cut mortgage rates more aggressively and homebuyers still worried about falling prices, Beijing faces mounting pressure to craft a more forceful response. Whether the latest proposals will be large enough, and timely enough, to stabilize the market remains uncertain.
