China is now turning to rely on the housing provident fund, an overlooked pool worth 10.9 trillion yuan, to help ease its challenges in the property market.
The world’s second largest economy has been facing the housing market for several years. China’s top 100 developers now expected their sales to drop at least 10% to about 3.4 trillion yuan, which would be less than a third of its golden year in 2020. Thus, an accurate measure to ease the burden from mortgages has become a very important issue.
Chinese people are now favoring the housing provident fund to help them purchase property instead of loaning from the bank that often has a higher interest rate. Last year, the mortgages from the fund reached 8.1 trillion yuan. Many local governments now support this program.
The program, originated from Singapore 30 years ago, required 180 million employers and employees in China to make a contribution every month. According to the data in 2024, the fund’s worth had reached 10.9 trillion yuan.
In the past, the fund imposed several restrictions and conditions that limit the amount one person can loan, taking their bank account and the marriage status into consideration for approval. However, many municipalities and cities are now easing those conditions, underlining with increasing the loan volume.
Furthermore, the central bank also lowered the interest rate of mortgage loans for the housing provident fund, causing the usage to grow. Last year, the fund supported 33% of residential mortgages in Beijing.
Still, UOB analysts, Kay Hian, stated that the drop in the interest rate is not enough to trigger a rally in home sales. The recovery in the property market is dependent on the effective government policies and the economic outlook.
