China on Monday courted home buyers with a bigger tax break as it cut downpayment requirements for the second time in six months, stepping up a fight against sliding house prices that is imperiling the world's second-biggest economy.
The People's Bank of China (PBOC) said on its website that commercial banks can now lower their minimum downpayment requirement for buyers of second homes, and with outstanding mortgages, to 40 percent from 60 percent previously.
The Ministry of Finance, in a separate statement around the same time, said individuals selling an ordinary house were exempt from business taxes if they had owned it for more than two years. Analysts said sellers were previously exempted from taxes only if they owned the houses for at least five years.
The policy sweeteners, which were more generous than what the market had expected, confirmed rumours swirling in China on Monday that authorities were increasing support for the flagging real estate sector.
But some doubted the measures would spark a turnaround.
"We expect the housing market correction will continue, but at a relatively modest pace through the course of this year," said Zhu Haibin, an economist at JPMorgan.
"In our view, real estate investment growth will likely further decelerate from 10.5 percent in 2014 to about 6 percent in 2015, which will continue to drag on economic growth."
Worth around 15 percent of China's economy, the housing market, where prices fell at a record annual pace in February, has increasingly weighed on growth, by denting activity in sectors from cement to steel and glass making.
Economists have warned persistent market weakness could endanger Beijing's 7 percent economic growth target for 2015.
That China is now trying to lift its property market is an about-face in policy. As recently as early 2014, authorities were waging a four-year campaign to tame an exuberant market unceasingly pushing home prices to record highs.
Investors had speculated that China would cut downpayments for second home buyers with outstanding home loans to 50 percent.
Yet while Monday's move was more generous than many had expected, it was not clear banks would pass on the discounts to buyers.
Even before the latest relaxation, some banks wanted downpayments of as much as 70 percent, above a government-set minimum of 60 percent.
In its statement, the central bank urged financial institutions to "support home purchases" with a combination of commercial lending and a housing provident fund.
It said the downpayment for second home loans by borrowers from the housing provident fund was now set at 30 percent, provided they had no outstanding mortgages.
First-time buyers using the provident fund need only make a downpayment of 20 percent, the bank said, with all changes taking immediate effect.
The provident fund is a government-managed programme in which all of China's employers and employees contribute to a pool from which employees borrow to buy homes.
"The new measures are definitely helpful but the impact won't be significant," said Ada Wong, a vice president at China Aoyuan Property Group, a developer based in Guangzhou.
"This is because most of the speculative buyers have been eliminated. The market has become more rational so sales won't increase a lot," Wong said.
Real estate stock indexes rallied sharply in Shanghai on rumors of the change. The Shanghai composite property subindex closed up more than 7 percent, its best day since 2009, in massive volume.
That rally helped give fresh momentum to wider indexes, already rallying over signs of further policy support, with the CSI300 index closing up nearly 3 percent and the financials subindex up almost 4 percent.