On May 17, 2024, a national video conference was held to ensure the delivery of housing, and He Lifeng, member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, attended the meeting and delivered a speech. He Lifeng stressed that it is necessary to have a deep understanding of the people's nature and politics of real estate work, and pointed out that in cities with more commercial housing inventory, the government can order and purchase part of the commercial housing at a reasonable price as appropriate.
In the afternoon of the same day, at the regular policy briefing of the State Council, Tao Ling, deputy governor of the central bank, said that the central bank will set up a 300 billion yuan affordable housing re-loan 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 placement or rent.
On the same day, the housing loan policy has also been heavily adjusted: the lower limit of the interest rate of commercial personal housing loans has been cancelled, the interest rate of personal housing provident fund loans has been reduced, and the lower limit of the down payment ratio of the first set of personal housing has been adjusted to a record low of 15%. China's housing loan policy has entered the most accommodative period in history.
In addition to activating the demand side, the above package of policies has also been dispatched on the supply side, and the "national team" has purchased the stock of commercial housing and transformed it into affordable housing.
Affected by the good news, the A-share real estate sector rose in the afternoon. As of the close, the real estate sector rose more than 7%. Vanke, I love my home, Gemdale Group, Poly Development and other more than 20 real estate stocks have a daily limit. In terms of Hong Kong stocks, Evergrande Property rose 34.33%, Sunac China rose 25.85%, Agile Group rose 24.32%, and Longfor Group rose 10.87%.
The most accommodative mortgage in history has stimulated market transactions
On May 17, the People's Bank of China and the State Administration of Financial Supervision and Administration issued a notice that the down payment ratio of commercial personal housing loans for the first house will be adjusted to no less than 15% for households that take out loans to purchase commercial housing, and the down payment ratio for commercial personal housing loans for second houses will be adjusted to no less than 25%.
The 15% down payment for a first home is already the lowest in China's mortgage down payment history.
In 2014, the lower limit of the down payment ratio for the first and second homes in the country was 30% and 60% respectively; In March 2015, the down payment ratio for second homes was reduced to a minimum of 40%, and the first home remained unchanged; In September of the same year, the down payment ratio for the first home in the country was loosened, and the minimum down payment ratio in cities with no restrictions on purchase was reduced to 25%; In 2016, the minimum down payment ratio in cities with no purchase restrictions was further reduced to 20%, and the minimum down payment ratio for second homes was also reduced to 30%. In the following 7 years, the minimum down payment ratio has not changed. Until August 2023, the lower limit of the down payment ratio for the first and second homes in the country will be lowered to 20% and 30% respectively.
In addition, the new policy also abolishes the lower limit of the interest rate policy for commercial personal housing loans for the first and second houses at the national level. Previously, the lower limit of the loan interest rate policy for first and second homes at the national level was -20 basis points for loans with a maturity of more than 5 years (LPR) and LPR +20 basis points for a maturity of more than 5 years. According to the latest loan prime rate, the lower limit is 3.75% and 4.15% respectively.
The new policy also lowers the interest rate of personal housing provident fund loans, and from May 18, 2024, the interest rate of personal housing provident fund loans will be reduced by 0.25%.
This means that the interest rate of the first set of personal housing provident fund loans for less than 5 years (including 5 years) and more than 5 years will be adjusted to 2.35% and 2.85% respectively.
With the introduction of these three blockbuster loan policies, the down payment policy has also entered the most relaxed stage in history. The model of low down payment + low commercial loan interest rate + low provident fund interest rate will reduce the cost of buying a house to a certain extent and drive the transaction.
The stimulus effect of this policy mix has recently been felt in some cities.
Taking Hangzhou, which was previously known as the "most relaxed stage" in the industry, as an example, on May 9 this year, Hangzhou fully lifted the purchase restrictions, and the listing was the first set. A staff member of the credit department of the Hangzhou Xihu District branch of a commercial bank told the Economic Observer that after the adjustment of Hangzhou's loan policy, many inquiries from customers can be received every day, and buyers are most concerned about whether the interest rate of the first home loan can be reduced. He said that after the announcement of the interest rate cut on May 17, there have been many customer inquiries. At present, the sub-branch has not received a specific notice of the adjustment of the down payment ratio and loan interest rate in Hangzhou, and is also waiting for the final result.
The regional person in charge of the above-mentioned large real estate company told the Economic Observer that a series of policies such as liberalizing purchase restrictions, reducing the proportion of down payments, and lowering interest rates are major benefits for the real estate market, which greatly reduces the threshold and cost of buying a house, and can release part of the demand and inject new vitality into the property market.
He believes that unlike 2014 and 2015, the current real estate supply and demand pattern has undergone fundamental changes, from investment demand to residential demand, "unlike investment demand, the policy is flocking to buy a house, residential demand is relatively rational, and the policy effect will be slowly released."
In his view, for the demand side of the property market, the biggest uncertainty is still the lack of confidence of home buyers in their future income, "Mortgages are generally twenty or thirty years, for example, if I want to change houses, not only consider the down payment, but also consider whether the income in the next two or three decades can support the mortgage and other household expenses."
The "national team" entered the field to speed up the destocking
On April 30 this year, the meeting of the Political Bureau of the Central Committee proposed for the first time to "coordinate the study of policies and measures to digest the stock of real estate and optimize the incremental housing". Since then, many places have successively relaxed the purchase restriction policy. Up to now, except for the first-tier cities, the main urban area of Tianjin, Zhuhai Hengqin, and Hainan Province, which have retained the purchase restriction policy, other cities have completely canceled the purchase restriction policy.
The relaxation of purchase restrictions and the continuous expansion of the scope of settlement when buying houses have played a certain role in boosting market transactions and confidence, but the work of destocking is still arduous, and the market urgently needs new strategies. Recently, Hefei, Nanjing, Hangzhou, Dali and other places have introduced policies to encourage the acquisition of stock housing, and the "purchase instead of construction" model has been initially implemented.
On May 17, the central bank created a new structural monetary policy tool - affordable housing re-lending, which is provided by the central bank with low-cost re-lending funds, with an interest rate of 1.75%, a term of 1 year, and can be extended 4 times, including 21 national banks such as 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 central bank will issue re-loans at 60% of the loan principal, which can drive bank loans of 500 billion yuan.
"Purchasing instead of building" has two goals: one is to speed up the destocking of existing commercial housing and reduce the pressure of the current imbalance between supply and demand in the real estate market; The second is to help ensure the delivery of buildings and the "white list" mechanism to alleviate the dilemma of real estate enterprises. After the real estate enterprise sells the completed commercial housing, the returned funds can be used to continue the construction of the project under construction and improve the financial situation of the real estate enterprise. After the ability of real estate enterprises to withdraw funds is enhanced, it is also conducive to more projects to meet the "white list" conditions, forming a virtuous circle.
It is worth noting that in 2023, the central bank has set up a rental housing loan support plan to support eight cities including Jinan and Zhengzhou to pilot market-oriented bulk acquisition of housing stock and expand the supply of rental housing.
For the stock of land, the policy is clear, the stock of land that has not yet been developed or has been started but not completed, through the government to recover the acquisition, market circulation and transfer, enterprises continue to develop, etc., properly dispose of and revitalize, promote real estate enterprises to alleviate difficulties and reduce debts, and promote the efficient use of land resources.
In the view of a regional head of a large real estate company, the policy can improve the liquidity of real estate enterprises to a certain extent, whether it is a unsalable project, or land that cannot be developed, if it can be realized with the help of the policy, it can not only improve the liquidity of the enterprise, but also allow the company's assets to recirculate, and then get out of the predicament.
Destocking the real estate market is the core goal of this round of regulation. According to data from the Zhuge Data Research Center, in April this year, the destocking cycle of new houses was 18 months, 0.8 months longer than the previous month, and the current destocking pressure in the new housing market has reached a high point.
Behind the high inventory is a sharp decline in sales, and it is imperative to re-energize the market activity while destocking.
It is related to the national economy and people's livelihood and the rescue of the market is imminent
Why did the "national team" go to stock? Why are mortgage rates at record lows? Why do you want to bail out the market?
Lu Ting, chief economist at Nomura China, has mentioned that the real estate sector contributed 38% of China's fiscal revenue before the decline, and it is doubtful that the rise of new industries can fill the economic growth gap caused by the downturn in the real estate sector.
In China, local government revenues are closely related to land finance. According to Zeping's macro data, in 2022, land transfer income and real estate special tax will account for 26% of local fiscal revenue, and land prices will account for about 6% of housing prices.
At present, even in first-tier cities, the local finances of some districts are under great pressure. A person familiar with the matter told the Economic Observer that some district governments in Shanghai's five major new cities have not been able to open new projects for several years because of the sharp decline in land sales income.
In addition, the real estate industry also directly and indirectly solves a large number of employment problems. Economist Ren Zeping once said that real estate, as the first pillar industry, is associated with more than 60 industries and tens of millions of jobs, and real estate through investment and consumption not only directly drives the manufacturing sectors such as building materials, furniture, and wholesale related to housing, but also significantly drives the tertiary industries such as finance and business services. Stabilizing the property market is crucial to stabilizing growth, stabilizing employment, and preventing risks.
According to the "2023 Migrant Worker Monitoring Survey Report" released by the National Bureau of Statistics, due to the downturn in the property market, the number of migrant workers engaged in the construction industry decreased from 55.577 million in 2021 to 45.82 million in 2023. In two years, there was a decrease of 9.757 million.
Regarding the impact of the package of policies on the real estate market, a person in charge of a medium-sized real estate company told the Economic Observer that the policy has given the market confidence to a certain extent under the current situation of serious lack of expectations and confidence. Next, we should observe the market feedback of cities of different energy levels, "overall it must be a good thing, which is a great benefit to the industry."
In his view, the crux of the current situation is that the normal cycle is stuck, "one ring owes money to the other, such as the local government infrastructure money can not be paid, resulting in downstream construction companies have no money, and construction companies will default on suppliers, after the source of living water is opened, it will naturally be able to move."
A middle-level person from a private real estate company believes that they can pay attention to the market performance this weekend, and "the transaction should be able to go up". He said that because many customers are holding the currency and waiting for the policy, they feel that they have to wait for the policy to bottom out, and this time it should be bottomed out, and the customers who are waiting and watching will definitely enter the market.
(Source: The Economic Observer)