Economist Ren Zeping: Epic good, is real estate saved this time?

Zeping macro

2024-05-18 07:25Posted in Beijing Finance and Economics Creators

Economist Ren Zeping: Epic good, is real estate saved this time?

Text: Ren Zeping's team

Guide

The ultimate combination punch is coming together:

1. The minimum down payment ratio of the first commercial housing loan is not less than 15%, the minimum down payment ratio of the second set is not less than 25%, and the minimum down payment ratio of the first set has reached a record low. It is expected that rigid demand and improved demand will be released, but the effect is limited due to the weak impact of residents' income and employment expectations.

2. The interest rate of the provident fund loan for the first and second homes has been lowered again after 20 months, hitting a record low. Previously, the interest rate of commercial housing loans continued to decline, and the interest rate spread between commercial housing loans and provident fund loans continued to narrow.

3. Cancel the lower limit of the interest rate policy for commercial housing loans for the first and second homes, and implement policies according to the city. It is expected that more cities will join the "cancellation of the lower limit of commercial mortgage interest rates", and commercial mortgage interest rates are expected to continue to fall.

4. It is planned to set up a re-loan of 300 billion yuan for affordable housing, issue loans to local state-owned enterprises, and purchase commercial houses that have been completed and unsold for use as affordable housing.

The establishment of a housing security bank advocated by us before, and the government's collection and storage of housing for affordable housing (please refer to the "Concept on the Establishment of a Housing Bank") are being implemented, which is an effective way to solve the real estate dilemma, 300 billion yuan or a preliminary attempt, and the follow-up policy needs to continue to increase.

At present, the property market is sluggish, the local financial pressure is greater, and the local government has more than enough to ensure the delivery of buildings and purchase commercial housing. Where does the money come from? The central bank sets up a special re-loan for the acquisition of commercial housing, and the local government applies for low-interest loans from state-owned commercial banks with the acquired commercial housing as collateral, and the commercial banks apply for re-loans from the central bank, that is, quasi-PSL, and the local government pays the real estate enterprises after obtaining the funds from the commercial banks.

The government's collection and storage model is conducive to destocking, saving housing enterprises, saving the property market, benefiting finance, and benefiting people's livelihood. Real estate enterprises get funds to alleviate cash flow pressure, on the one hand, they are used to acquire land, which is good for local finances; On the other hand, the construction of housing should prevent unfinished construction and improve people's livelihood. At the same time, the local government will reduce market supply through the acquisition of stock housing, achieve the goal of destocking, promote the healthy development of the industry, and stabilize the economy. In addition, the bulk acquisition of affordable housing and the construction of the Chinese version of HDB flats have won many birds with one stone.

No matter how cold and long the winter is, spring will come.

China's property market will not repeat the Japanese nineties, there is still a lot of room for urbanization, if the right way is done, real estate still has a solution. Japan's urbanization process ended in the 90s, and its per capita GDP was 30,000 US dollars. China has a lot of space, it takes time, and time is exchanged for space. The soft landing of the traditional economy, the rise of the new economy, the double pillars, China's economy come on!

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1 Event: Four arrows at the same time, real estate to meet the epic good, major policy inflection point

Event 1: The minimum down payment ratio of commercial housing loans for the first and second homes has been lowered to 15% and 25%.

On May 17, the People's Bank of China and the State Administration of Financial Supervision and Administration issued the Notice on Adjusting the Minimum Down Payment Ratio of Personal Housing Loans, which proposed that for resident families who take out loans to purchase commercial housing, the minimum down payment ratio of commercial personal housing loans for the first house will be adjusted to no less than 15%, and the minimum down payment ratio for commercial personal housing loans for second houses will be adjusted to not less than 25%.

The minimum down payment ratio for commercial housing loans for the first and second homes has been reduced again after 8 months, and the minimum down payment ratio for the first set has reached a record low. Since the comprehensive housing reform in 1998, the lowest down payment ratio appeared in October 2008. In response to the global financial crisis, China's domestic economy has been severely impacted, and in response to the crisis, China has taken a series of measures, including adjusting the minimum down payment ratio for first and second homes to 20%. In 2015, the down payment ratio was also reduced from 30% to 20% in order to destock. In August 2023, the down payment ratio of the first and second sets of commercial loans will be adjusted to 20% and 30%. This time, the minimum down payment ratio for the first and second houses is 15% and 25%, the first down payment ratio is the lowest in history, and the second set of down payment ratio is close to the lowest.

Event 2: The interest rate of the provident fund loan for the first and second homes was reduced by 25BP.

On May 17, the central bank issued the "Notice on Reducing the Interest Rate of Personal Housing Provident Fund Loans", starting from May 18, 2024, the interest rate of personal housing provident fund loans will be reduced by 0.25 percentage points, and 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, and the interest rates of the second set of personal housing provident fund loans for less than 5 years (including 5 years) and more than 5 years will be adjusted to no less than 2.775% and 3.325% respectively.

The interest rate on personal housing provident fund loans has been lowered again after 20 months, hitting a record low. Historically, the PBOC has lowered the interest rate on personal provident fund loans six times, namely from January to February 2002, from August to December 2008, from May to July 2012, from October 2014 to August 2015, and from September to October 2022. This time, it was lowered by another 25 bps, hitting a record low. The reduction is related to the continued decline in LPR and commercial mortgage rates. So far in 2023, the central bank has significantly lowered the LPR, and at the same time, commercial banks have also continued to reduce the interest rate of personal mortgage loans, resulting in the continuous narrowing of the interest rate difference between the interest rate of commercial housing loans and the interest rate of provident fund loans.

Event 3: Completely cancel the lower limit of the interest rate policy for commercial housing loans for the first and second homes, and implement policies according to the city.

On May 17, the People's Bank of China (PBOC) issued the Notice on Adjusting the Interest Rate Policy for Commercial Personal Housing Loans, canceling the lower limit of the interest rate policy for commercial personal housing loans for the first and second houses at the national level. In accordance with the principle of city-specific policies, each provincial-level branch shall guide the self-discipline mechanism of market interest rate pricing at the provincial level, and independently determine whether to set the lower limit and lower limit of the interest rate of commercial personal housing loans in each city within its jurisdiction (if any) according to the real estate market situation of each city within its jurisdiction and the regulatory requirements of the local government. Banking financial institutions should be based on the provincial market interest rate pricing self-discipline mechanism to determine the lower limit of interest rates (if any), combined with the institution's operating conditions, customer risk status and other factors, reasonable determination of the specific interest rate level of each loan.

Before the Notice, 64 cities across the country had cancelled the lower limit of the interest rate on the first home loan. Before the "Notice", the policy on the lower limit of the interest rate of commercial housing loans was introduced in December 2022, and the central bank and the former China Banking and Insurance Regulatory Commission announced the establishment of a dynamic adjustment mechanism for the interest rate policy of the first set of commercial personal housing loans, and the lower limit of the interest rate of commercial personal housing loans for the first set of housing will be relaxed in stages for cities where the sales price of newly built commercial residential buildings has declined for three consecutive months month-on-month and year-on-year during the assessment period. As of the first quarter of 2024, 64 cities have lifted the lower limit on the interest rate of the first set of commercial mortgages.

Event 4: It is planned to set up a re-loan of 300 billion yuan for affordable housing and purchase commercial housing for affordable housing

On May 17, the central bank announced that it planned to set up a 300 billion yuan affordable housing reloan, with an interest rate of 1.75% and a term of 1 year, which can be extended 4 times. The recipients include 21 national banks, including China Development Bank, policy banks, state-owned commercial banks, postal savings banks, and joint-stock commercial banks. In accordance with the principle of independent decision-making and assumption of risk, banks issue loans to local state-owned enterprises selected by the city government to purchase completed and unsold commercial houses for use as affordable housing. The central bank will issue re-lending according to 60% of the loan principal, which is expected to drive bank loans of 500 billion yuan.

The "Notice" is a continuation and implementation of the "overall study and digestion of stock real estate and optimization of policy measures for incremental housing". Recently, local governments have successively introduced policies to revitalize the stock of housing and use it as affordable housing. In July 2022, Zhengdi Leasing acquired the storage of houses in Zhengzhou Fourth Ring Road as talent apartments; In September, Jinan Urban Development publicly acquired 3,000 sets of commercial houses as rental reserves; Huzhou, Handan, Altay and other cities have also issued policies to encourage the conversion of stock housing into rental housing. In May 2024, the government of Hangzhou's Lin'an district purchased commercial housing from developers for use as public rental housing. Dali encourages the acquisition of stock housing as rental housing or talent housing.

2 Impact: Reduce the cost of buying a house, good for the release of demand, collection and storage is an effective way, and the intensity can be greater

1) The reduction of the down payment ratio directly alleviates the pressure on the down payment amount of the house purchase, but it also means that the repayment pressure increases. Although the decline in the down payment ratio can alleviate the financial pressure on the down payment link and leverage the housing with a higher total price, it will also lead to an increase in the monthly repayment pressure of residents. In the context of weak residents' income and employment expectations, the decline in the down payment ratio will release a certain demand for rigid demand and improved housing, but the impact is relatively limited.

2) The interest rate of provident fund loans has fallen, the lower limit of commercial mortgage interest rates has been cancelled, and it is expected that the interest rate of commercial housing loans in high-inventory cities may fall below 3% in the future, and the cost of buying a house will drop significantly.

Before the policy adjustment, the overall first and second home loan interest rates in 100 cities were at a historical low, but the first-tier cities were higher than the average. Shell data shows that in March 2024, the average interest rate of the first mainstream mortgage in Baicheng is 3.59%, which is lower than the LPR with a term of more than 5 years, and the average interest rate of the second mainstream mortgage is 4.16%. The interest rates for the first and second homes in the first-tier cities are 3.88% and 4.29% respectively, the second-tier cities are 3.61% and 4.17%, and the third- and fourth-tier cities are 3.57% and 4.15%.

After the policy adjustment, it is expected that the interest rate of commercial housing loans in most cities will continue to fall, and the cost of home buyers will be significantly reduced. According to the provident fund loan amount of 1 million yuan, the loan for 30 years, and the repayment method of equal principal and interest, the monthly payment will be reduced by about 135 yuan, and the cumulative monthly payment for 30 years will be reduced by 49,000 yuan. In addition, the decline in CPF loan interest rates will effectively promote the downward trend of commercial mortgage interest rates. In the future, the lower limit of commercial mortgage interest rates in more cities will be abolished, and interest rates are expected to usher in a new round of reductions, effectively reducing the interest burden of new home purchases and reducing the pressure of loan repayment.

3) The government's collection and storage of housing for affordable housing is being implemented, and a PSL-like is being set up to remove inventory, save real estate enterprises, save the property market, benefit finance, and benefit people's livelihood. 300 billion yuan or a preliminary attempt, the government storage model is an effective way to solve the real estate dilemma, the future needs to continue to increase, waiting for the industry to bottom out.

The performance of the "Golden Three, Silver and Four" property market is less than expected, the funds of real estate enterprises are tight, and the local financial pressure is greater. In this case, the local government may not have enough funds to ensure the delivery of buildings and purchase commercial housing. Therefore, the central bank sets up a special re-loan for the acquisition of commercial housing, and the local government applies for low-interest loans from state-owned commercial banks with the acquired commercial houses as collateral, and the commercial banks apply for re-loans from the central bank, that is, quasi-PSL, and the local government pays the real estate enterprises after obtaining the funds from the commercial banks.

Real estate enterprises get funds to alleviate cash flow pressure, on the one hand, they are used to acquire land, which is good for local finances; On the other hand, the construction of housing should prevent unfinished construction and improve people's livelihood. At the same time, the local government will reduce market supply through the acquisition of stock housing, achieve the goal of destocking, promote the healthy development of the industry, and stabilize the economy. In addition, the bulk acquisition of affordable housing and the construction of the Chinese version of HDB flats have won many birds with one stone.

3 Outlook: Short-term policies help the industry to build a bottom, and there is still a lot of room for development in the medium and long-term real estate

In the short term, policies such as purchase restrictions, mortgage interest rates, and financing for real estate enterprises may be further optimized to promote the bottoming of real estate.

Since the beginning of 2024, the mainland's real estate optimization policies have continued to increase and accelerate their implementation. On the supply side, the real estate financing coordination mechanism is expected to be normalized, and state-owned enterprises are encouraged to acquire developers' inventories and improve the capital situation of real estate enterprises. On the demand side, interest rate cuts, down payment ratios, tax incentives, relaxation of settlement, relaxation of purchase restrictions, optimization of provident fund policies, etc., continue to release rigid demand and improve demand.

In the context of major changes in the supply and demand relationship of the mainland real estate market, in the future, on the supply side, there is still room for the improvement of real estate enterprises' funds; On the demand side, the relaxation of purchase restrictions in core cities and the decline in mortgage interest rates are the general trend. At present, the real estate has entered the stage of shifting from "anti-overheating" to "anti-overcooling", and the real estate market has been overshot from the sales, investment and other indicators, and the property market is weak.

In the medium and long term, China's real estate market still has a lot of room for development, taking into account the process of urbanization, improvement demand, urban renewal, etc. According to our calculations in the "China Housing Demand Estimation 2024", by 2030, the demand for new housing in the mainland will slowly drop to 910 million square meters, and it is expected that the new housing demand in the mainland will be 930 million square meters per year from 2024 to 2030, of which rigid demand, improvement demand and renewal demand will account for 29.0%, 41.1% and 29.8% respectively, and improvement demand will become the largest demand support for the mainland housing market.

4 Three short-term tricks can save real estate

We have previously proposed that three measures can save the current real estate, real estate is the first pillar industry, real estate is stable, the economy is stable, employment is stable, and the financial industry is stable.

Establishment of a housing security bank and acquisition of developers' inventory. Establish a special fund to purchase the developer's land and commercial housing inventory, and the developer must ensure the delivery of the building when he gets the funds, so as to prevent the unfinished business and avoid making the buyer bear the risk of real estate adjustment. The surplus funds collected by real estate enterprises can be used to acquire land, so the land finance is restored, the pressure on local debt can be alleviated, and the infrastructure is expected to rebound. The acquisition of inventory commercial housing and land for rental housing and affordable housing, help to improve people's livelihood, the original developer has a lot of inventory, if the additional land for rental housing will lead to a huge waste, one stone.

Completely cancel the purchase restriction and return to the market. The current market downturn is a good opportunity to lift the purchase restrictions, and the developed countries have no purchase restrictions for domestic residents, and they are all adjusted through prices and taxes, rather than artificial administrative means, which runs counter to the market economy. If the first- and second-tier markets are active, they can boost economic growth by contributing more land finance, taxes and fees. In the context of the current industry downturn, the cancellation of purchase restrictions will promote the bottoming up of real estate in the short term; In the medium and long term, after the market stabilizes, it can be considered to regulate the market through tax mechanisms such as real estate tax, and at the same time increase stable tax sources for local finance, and achieve a balance between supply and demand through the linkage between people and land, killing two birds with one stone.

Continue to cut interest rates sharply to reduce the cost of buying a house and reduce the burden on residents. The monetary policy department supports banks to reduce the cost of debt through targeted RRR cuts. Now that the real interest rate is on the high side, the stock interest rate should be greatly reduced, and the first set was lowered before, and the social response is very good, and the second set should also be reduced, which is good governance.

5. Reform of the long-term housing system: urban agglomeration strategy, financial stability, people-land linkage, real estate tax, and rent-purchase simultaneously

In the industry, we have proposed an analytical framework of "real estate looks at population in the long term, land in the medium term, and finance in the short term". On the basis of this framework, it is proposed that "the key to the new real estate model is the strategy of urban agglomeration, financial stability, people-land linkage, real estate tax and rent-purchase simultaneously". Exchange time for space to promote long-term stable and healthy development. If a combination of long-term and short-term measures is adopted, it is expected to promote a soft landing of real estate and contribute to China's economic recovery and employment.

1) Promote the strategy of urban agglomeration in metropolitan areas. People go with the industry, and people go to higher places. The report of the 20th National Congress of the Communist Party of China pointed out that "in-depth implementation of the regional coordinated development strategy, major regional strategies, main functional area strategies, and new urbanization strategies".

2) Maintain long-term stability of monetary policy and real estate financial policy. Stabilize home buyers' expectations and support rigid and improved housing demand. Standardize the financing use of real estate enterprises, support the reasonable financing needs of real estate enterprises, and provide a certain time window for real estate enterprises with problems to have a chance to save themselves.

3) Reform the "man-land linkage" with the increase of permanent population as the core to optimize land supply. Promote the linkage between the new permanent population and land supply, the balance of inter-provincial cultivated land occupation and compensation and the increase and decrease of urban and rural land, and strictly implement the principle of "linking the inventory destocking cycle with land supply" to optimize the current land supply model.

4) Steadily promote the pilot of real estate tax. It is the general trend that real estate tax will replace land finance, and it is necessary to establish a scientific economic model to evaluate the impact of real estate tax on all parties in the future. At present, the economy is in the bottoming period, and the real estate has not yet come out of the predicament, and the conditions for the collection of real estate tax are not met.

5) Establish a housing supply system that combines rental and purchase. The report of the 20th National Congress of the Communist Party of China emphasized that "accelerate the establishment of a housing system with multi-subject supply, multi-channel security, and simultaneous rental and purchase". Enriching the supply forms of commercial housing, rental housing, co-ownership housing and other categories, and forming a multi-party supply pattern of the government, developers, leasing intermediaries, long-term rental companies, etc., can accelerate the solution of housing difficulties for new citizens and young people, and promote real estate enterprises to find new growth space in the leasing business.

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