2nd LD-Writethru: China Focus: China loosens home down payment requirement

China announced it would lower the minimum deposit for home purchases in most cities to spur the real estate market on Tuesday.

The People's Bank of China (PBOC), the central bank, said that in cities where there was no home purchase restrictions, down payments for first homes financed by loans from commercial banks will stay at a minimum of 25 percent "in principle," but they can go down as much as 5 percentage points.

For those who want to buy a second home with commercial loans but have outstanding loans on their first property, the down payment requirement will be cut to no less than 30 percent from the current 40 percent.

The PBOC said that local governments of those cities can decide on the exact deposit requirement "according to their own conditions," under the guidance of the PBOC and the China Banking Regulatory Commission.

The move, the second adjustment in four months, is intended to "support reasonable consumption of housing" and promote the stable and healthy development of the market, the central bank and the banking regulator said in a joint statement.

In September, the minimum down payment for first home buyers was lowered to 25 percent from the previous 30 percent in cities that did not have restrictions on purchases.

The new policy came as the latest effort from the government to reduce property inventory and revive the sluggish market.

Li Daxiao, an economist with Yingda Securities, considers the adjustment a boon for home purchases and positive to stabilizing the housing market.

China's property sector took a downturn in 2014 due to weak demand and a supply glut.

Sales and prices are falling, and investment is slowing, which dented activity in sectors ranging from steel, cement, furniture to home appliances. But unsold homes are piling high, especially in medium and small-sized cities.

China's unsold housing floor space rose to 718.53 million square meters by the end of 2015, data from the National Bureau of Statistics (NBS) showed. It is enough to house nearly 24 million people given China's estimated 30 square meters of per capita living space.

Zhu Zhenxin, an analyst with Minsheng Securities, said minimum down payment levels could be lowered further and more supportive policies might be unveiled for the property sector in the next two or three years.

The country has made de-stocking its massive property inventory one of this year's major economic tasks, over concerns that the ailing housing market could derail the economy, which registered its weakest growth rate in a quarter of a century.

China's economy expanded at 6.9 percent in 2015, partly due to the lackluster property market which used to be a major economic driver.

In cities where home purchase restrictions still apply, old down payment rules will remain effective, the PBOC said.

Beijing, Shanghai, Guangzhou, Shenzhen and Sanya are the remaining five cities with restrictions on home purchases, which were introduced in 2010 to rein in house prices.

The differentiated treatments were due to varied markets conditions in different cities. While several metropolises saw increasing demand, small cities are still in the trough with high inventories.

New home prices soared 47.5 percent year on year in the southern Chinese city of Shenzhen in December, the sharpest increase among major cities, while the steepest decline was registered by the northeastern city of Dandong, where prices dropped 5.3 percent.

The Chinese government has introduced a slew of measures to support the property sector, cutting interest rates, easing down payment requirements and rolling back home purchase restrictions.

China's real estate sector warmed further in December, with more major cities reporting rises in new home prices, the NBS said. But prices for existing homes remained weak. Endi