Why mortgage subsidies could be key to getting China’s consumers spending

China’s property downturn and sluggish consumer spending have become twin anchors weighing down the economy over the past few years. Now, scholars at a top Beijing university are proposing a measure they believe could ease both problems: a mortgage subsidy.

Given that nearly 80 per cent of China’s household wealth is tied up in property, a mortgage subsidy could play an important role in boosting consumption if it helps to stabilise property prices, researchers from the university’s Academic Centre for Chinese Economic Practice and Thinking (Accept) said during an event on Tuesday.

“Fluctuations in housing prices can have a major impact on residents’ wealth, which in turn affects their consumption potential,” they added.

The team estimated that home prices in China’s major and medium-sized cities had fallen 16.5 per cent over the past three years, leading to a 13 per cent shrinkage in urban household assets.

“In the face of continuously falling home prices, authorities need to adopt a broader approach and swiftly introduce mortgage interest subsidies to reverse residents’ homebuying expectations.”