Chinese government attempting to salvage property market
The Chinese government is encouraging wealthier citizens to invest in a second home by reducing the deposit required from 30% to 20% in an attempt to salvage the property market after recent stock market crashes. Despite potential knock-on effects from so-called ‘Black Monday’, analysts have claimed that the housing market is in fact stabilising after a year-long slump, although experts warn that the market’s vast amount of unsold homes will deter investors and prevent complete recovery.
A "nail house", the last building in the area, sits in the middle of a road under construction in Nanning, Guangxi Zhuang Autonomous Region April 10, 2015. Reuters

China's stocks are crashing again and now the government is trying everything it can to stop the knock-on effects on other sectors.

More than $5 trillion has been erased from global stocks since China unexpectedly devalued its currency over the last month and the government realises that ordinary, retail investors have a lost vast amounts as cash — not just high net worth individuals.

China, which already has a problem with whole cities being populated with empty properties, is now hoping the richer parts of the population will be able to buoy up the property market by buying a second home. Furthermore, like how it has tried to stimulate its stock market by pouring government cash into equities, China's government has reduced the deposit required for those owning a second property.

"China's government has reduced the minimum down payment on a second home from 30% to 20% in most cities, to help buffer the property market from any effects of stock market volatility," said Mike Amey, managing director at Pimco on BBC's Today radio programme.

"A lot of the wealth in China for the regular population is in the housing market. So, if the housing market comes under pressure, that is more significant for the wealth effect in the domestic economy."

In June, developers in China were giving away Porsches to sell houses due to over development and lack of uptake.

Chinese stocks tanked as much as 5% in early trade today before recovering into the mid-session close.

The benchmark Shanghai Composite index closed the morning session down 1.06% at 3172.0. Earlier in the day it had been down close to 5%.

However, if China's government is hoping to get its richer population to buy more properties onshore, it may have a tough time on its hands.

Chinese home buyers comprise roughly 2% of US housing demand and many more wealthy investors favour western properties for investment rather than a second home in China.

According to the US-based National Association of Realtors, Chinese people spent $29 billion last year on property in the US. They also account for 16% of international home buyers in the US.