Author | He Fan, Cai Qisheng, Guo Zairan, Gu Huaiyu, Guo Yuwei, Lu Political Commissar
Real estate, monetary policy, bond market
On May 17, 2024, the State Council Information Office held a regular briefing on the policies of the State Council to introduce the relevant policies for ensuring the delivery of housing.
From the perspective of the relevant policies and measures released this time, they mainly include the following: First, set up a 300 billion yuan re-loan for affordable housing, drive bank loans of 500 billion yuan, acquire commercial housing that has been built and unsold, and help resolve the inventory of commercial housing. The 500 billion yuan fund can resolve the inventory of 67.63 million square meters of commercial housing in the country, accounting for about 9.1% of the current area of commercial housing for sale in the country.
The second is the policy of disposing of idle land and revitalizing the stock of land, the latter including supporting enterprises to optimize development, promoting market circulation and transfer, and supporting local governments to recover land at reasonable prices. The revitalization of the stock of land will accelerate the construction of affordable housing, and some real estate companies may also obtain a certain amount of cash flow by selling back land.
The third is to reduce the down payment ratio, the down payment for the first home and the down payment for the second home to 15% and 25% respectively, which is the lowest level in history. Lowering the down payment ratio helps lower the threshold for home purchases, and it also means that homebuyers will need to take on higher debt leverage, which is still high for residential mortgage loans.
Fourth, the lower limit of the interest rate policy for commercial personal housing loans will be completely abolished, which will help the interest rate of newly issued personal housing loans to further decline. If the mortgage interest rate falls by 30-40bp after the policy is implemented, the spread between the general loan interest rate and the personal housing loan will reach 90-100bp, close to the high point of the interest rate spread between the two in 2015-2016.
Fifth, the interest rate of provident fund loans will be reduced, which will reduce the interest payment cost of both incremental and existing provident fund loans. Previously, the cumulative reduction in the interest rate of provident fund loans was lower than the decline in the 5-year LPR, and this time the interest rate of provident fund loans was "reduced".
For the bond market, there are headwinds in the short term, but they are still strong in the medium term. In the short term, risk appetite has picked up, the scale of net financing of government bonds has risen, and the "manual interest supplement" of standardized deposits has disturbed the capital side, and the trend of 30-year treasury bonds may be weaker than that of other maturities. In the medium term, the "make-up reduction" of the provident fund loan interest rate and the cancellation of the lower limit of the housing loan interest rate will further reduce the interest rate of personal housing loans, and the central interest rate of the bond market is still on the way down. If the short-term bond market causes the yield to pull back due to factors such as the recovery of risk appetite, it is a better time to allocate it; From the perspective of the comparison between housing loans and 30-year treasury bonds, around 2.65%-2.7% or a better allocation range for 30-year treasury bonds in the next 3-6 months.
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