The center sets the tone! The real estate market, the big changes are coming

Financial vernacular

2024-05-18 11:10Posted in Guangdong real estate creators

Author: Yu Fei

01

The property market has entered a new era

May 17 must be a day that will be recorded in the history of China's property market.

Its importance is mainly reflected in two points:

First, the rescue of the market beyond historical strength.

Yesterday, four arrows were fired in one day, reducing down payments, interest rates, provident fund interest rates, and savings.

1. Abolish the lower limit of the national personal housing loan interest rate

2. The interest rate of provident fund loans was reduced by 0.25 percentage points

3. The down payment ratio of the first and second sets is reduced to no less than 15% and 25% respectively

4. Local governments acquire and use commercial housing as affordable housing, and recycle and repurchase idle residential land of real estate enterprises

Among them, the down payment for the first home fell to 15%, and the second home fell to 25%, both of which are the lowest percentages since the commercialization of real estate.

In addition, the matter of collecting and storing is also a historic move. Although there is a big gap in strength between the detailed rules announced yesterday and the small composition that came out before, the significance of the move is extraordinary.

Second, a new attitude and statement towards the property market.

At the National Standing Committee meeting in March this year, there was a new expression on the property market, "the real estate industry chain is long and wide-ranging, which is related to the vital interests of the people and the overall situation of economic and social development." ”

At that time, this issue said that this statement was a major change in the central government's attitude towards the property market, and it was to correct the status of the property market again.

This time, the formulation is more original.

Yesterday morning, at the "National Video Conference on Effectively Ensuring the Delivery of Housing", Vice Premier He Lifeng of the State Council emphasized:

Deeply understand the people's nature and politics of real estate work, continue to adhere to city-specific policies, do a good job in the risk disposal of unfinished commercial housing, and solidly promote key tasks such as ensuring the delivery of housing and digesting the stock of commercial housing.

This means that stabilizing the property market has become a political task.

02

It's all about destocking

Let's take a look at the specific measures.

The central bank directly launched three arrows at the same time, reducing the down payment, canceling the lower limit of the interest rate on commercial loans for the first and second homes, and lowering the interest rate on the provident fund.

The three arrows are actually two arrows, because of the difference between the provident fund and the commercial loan, they emphasize that they are actually two big moves, reducing the down payment and the interest rate.

This is a combination of punches, which in a nutshell is to encourage leverage while reducing your mortgage burden.

Lower the down payment to make your entry into the car a lower threshold. After last year's round of down payment cuts, the down payment for first homes in most cities has dropped to 20%, and the second home has dropped to 30%.

Now there are further reductions, with both down payments down being cut by 5 percentage points.

The bar is lowered. For a house of 3 million, if you buy it with the qualification of the first house before, you will get a down payment of 600,000 yuan, and if you buy it with the qualification of a second house, you will get a down payment of 900,000 yuan.

After the down payment is reduced, the down payment is only 450,000 yuan for the first home qualification, and the down payment for the second home is only 750,000 yuan.

However, while reducing the down payment or increasing leverage, it also increases the loan amount. In the past, if it was the first home, the loan was up to 80%, that is, 2.4 million, but now you can borrow up to 2.55 million.

If you just reduce the down payment, you can't move the people to buy a house at all, because this is calling you to increase leverage, although the threshold is low, the cost is increasing.

Therefore, while reducing the down payment, it is accompanied by a reduction in interest rates. The lower limit on commercial loan rates for first and second homes has been removed.

The specific amount of reduction is up to each city to see.

Therefore, whether it can mobilize the enthusiasm of buying a house depends on the decline in interest rates. If the final result of the interest rate reduction reduces the total cost of buying a house, it will be of positive significance to promote people to buy houses. Otherwise, the effect will be none.

Market experts predict that after the policy is implemented, the mortgage interest rate in most cities may drop by 0.3 to 0.4 percentage points, and the total interest expense can be reduced by more than 70,000 yuan according to the calculation of 1 million loans, 30-year term, and equal principal and interest repayment. Interest expenses for improved demand housing will be reduced even more.

Another big trick to destocking is to collect and store.

At yesterday's meeting, the official emphasized:

The relevant local governments should proceed from the actual situation and properly dispose of the idle stock of residential land that has been transferred by means of repossession and acquisition as appropriate, so as to help real estate enterprises with financial difficulties to solve their difficulties. In cities with a large inventory of commercial housing, the government may purchase some commercial housing at a reasonable price as appropriate.

The final phrase is "a city with a large inventory of commercial housing". According to the latest data disclosed by CRIC:

Wuhan's narrow inventory of commercial housing in April was 18.65 million square meters, ranking first in the country, with a decommissioning period of 42 months. The top 10 cities in terms of inventory are Chengdu, Qingdao, Tianjin, Guangzhou, Beijing, Xi'an, Changchun, Foshan and Shenzhen.

The top nine cities have inventories of more than 10 million square meters.

These cities will inevitably make moves next, but none of them will be too big.

Because in the formulation of the document, two key words are used: "as appropriate" and "partially". This has greatly resolved the strength of this big move, especially for the repurchase of commercial housing.

The small essay that came out of the market before was to encourage local governments to buy back the stock of commercial housing that has not yet been sold, and it is a large-scale repurchase.

However, judging from the current statement, it is clear that the action will not be too large, and it is still small-scale.

The detailed rules issued later also confirm the fact that the strength will not be too large.

The central bank announced yesterday:

A 300 billion yuan re-loan for affordable housing will be set up to encourage and guide financial institutions to support local state-owned enterprises to purchase unsold commercial housing at a reasonable price in accordance with the principles of marketization and rule of law, and use it as affordable housing for sale or rent.

The recipients include 21 national banks, including the China Development Bank, policy banks, state-owned commercial banks, postal savings banks, and joint-stock commercial banks. Banks issue loans in accordance with the principle of independent decision-making and assumption of risk. The People's Bank of China (PBoC) will issue re-loans at 60% of the loan principal, which can drive bank loans of 500 billion yuan.

This amount of money is a drop in the bucket for the inventory of commercial housing with a market value of trillions, and it can't be leveraged at all.

According to the latest data released by the National Bureau of Statistics, at the end of April, the area of commercial housing for sale was 745.53 million square meters, a year-on-year increase of 15.7%. Among them, the area of residential buildings for sale increased by 24.5%.

Cartography: City Finance; Data: National Bureau of Statistics

The reason why there will be no large-scale buybacks is mainly due to lack of financial resources.

In the past three years, some cities have tried to use their own financial resources to buy back commercial housing, but they are only trying to do so, and there is no decent action.

Under the real estate downturn, most cities are struggling financially.

What's more, many local governments are already mired in debt.

The 12 regions named at the end of last year, Tianjin, Inner Mongolia, Liaoning, Jilin, Heilongjiang, Guangxi, Chongqing, Guizhou, Yunnan, Gansu, Qinghai and Ningxia, were directly required to reduce debts and not start new projects in 2024, except for basic livelihood projects.

Therefore, we see that local governments are not very afraid to borrow at the moment. Reflected in the data, it is the negative growth of social finance in April.

According to data disclosed by the central bank two days ago, the cumulative increase in the scale of social financing in the first four months of 2024 was 12.73 trillion yuan, 3.04 trillion yuan less than the same period last year. More importantly, the new social finance in April was -198.7 billion yuan, compared with 1.22 trillion yuan in the same period last year. The last time the social finance was negative in a single month was back in October 2005.

An important factor in the negative growth of social financing in April was the large-scale decline in government bond financing.

03

Whether it will cause a new round of housing price increases

The most critical question for everyone should be whether these big moves will cause a new round of housing price increases.

The point of this number is clear and unambiguous: no.

On the one hand, there is simply no such motivation. The population is declining, the demand is declining, the gap between low income and high housing prices is still there, and the status quo of oversupply has not changed.

On the other hand, it can be seen from the actions and attitudes of the officials that there is no such meaning.

The purpose of the new round of bailout has not changed, it is still a defense war, not a stimulus, and it is to defend the old-fashioned underlying assets of China's financial system.

While defending the old-fashioned underlying assets, establish a new underlying asset for China's financial system.

As we all know, the underlying assets of China's financial system have always been land and houses in the past.

Land and real estate are the underlying assets of credit, which in turn derives a large number of deposits, which are the cornerstone of broad money and liquidity, the anchor of the pricing of financial assets (interest rates), and the credit foundation of the entire economic system.

However, with the three-year adjustment, the volume and price of real estate have fallen, and the underlying assets are shaking.

The point of view given by the official account "Zhi Benshe" is:

First, as the pricing anchor of the financial system, the price of land and real estate has fallen, leading to a decline in the price of financial assets and the instability of the financial system; Second, as collateral assets of the commercial banking system, the price of land and real estate has fallen, resulting in a decline in the ability of commercial banks to expand loans, triggering an inverse multiplier effect, accelerating the contraction of broad money and market liquidity, and even liquidity risks.

Therefore, defending old-fashioned assets is actually starting a war to defend China's financial system.

So, where can we see that the state is reconstructing the underlying assets of the financial system? Isn't it continuing to support land and property as the underlying assets of the financial system?

The answer can be found in two ways:

First, it can be seen from the perspective of bond issuance.

The addition of 1 trillion yuan of special government bonds last year and 1 trillion yuan of ultra-long-term government bonds this year shows that China is trying to reshape the underlying assets of the financial system by issuing government bonds and placing risk-free assets to replace real estate in order to stabilize the financial system.

This model of underlying assets is also internationally applicable, and the underlying assets of the financial system of the world's developed economies are all treasury bonds.

To put it simply, in the past, our development model was to drive economic development with real estate, and promote people's housing to promote economy and consumption.

However, in the future, it is up to the state to increase leverage and issue treasury bonds in the form of national credit endorsement, which will focus on key tasks such as accelerating the realization of high-level scientific and technological self-reliance and self-reliance, promoting urban-rural integrated development, promoting regional coordinated development, improving the security and security of food and energy resources, promoting high-quality population development, and comprehensively promoting the construction of a beautiful China.

Second, the general tone of first establishing and then breaking.

Last year, two important meetings set the tone for real estate, first established and then broken.

That is, it cannot be broken until it is erected. This is a manifestation of both a determination to defend the financial system's old-fashioned underlying assets, as well as an intention to abandon the original dependence on the real estate economy.

The so-called "establishment" is to establish a new economic driving engine, establish a new real estate model, and establish a new financial system.

The so-called "breaking" is mainly to break three points: 1. Break the model of real estate-driven economic development; 2. Break the dependence of the central and local governments on land finance; 3. Eliminate the hidden worries of high housing prices.

Therefore, from the perspective of the top-level strategy, the official signal seems to indicate that it is enough to ensure that there is no systemic crisis, so that housing prices continue to fall slowly.

Then, in the process of continuous decline in real estate, we will adjust the economic structure, so that more funds can be invested in the science and technology industry, in emerging industries, and in industry, so as to upgrade our manufacturing industry chain.

This idea is exactly in line with the essence of "first establish and then break". The new is the goal, the old is also the goal, and the first to establish and then break is the method and tactic.

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Personal opinion, for reference only