news

On August 9, the People's Bank of China (hereinafter referred to as the Central Bank) released the "China Monetary Policy Implementation Report for the Second Quarter of 2024" (hereinafter referred to as the "Report").

The report points out that a prudent monetary policy should be flexible, moderate, precise and effective. It should reasonably grasp the relationship between the two largest financing markets, credit and bonds, guide the reasonable growth and balanced supply of credit, maintain reasonable liquidity, and keep the scale of social financing and money supply in line with the expected targets of economic growth and price levels.

The report pointed out that the central bank paid more attention to guiding the adjustment and optimization of the credit structure, and successively set up 500 billion yuan of re-loans for scientific and technological innovation and technological transformation, and 300 billion yuan of re-loans for affordable housing; launched a combination of real estate support policies, expanded the scope of support for carbon emission reduction support tools, and implemented various existing structural monetary policy tools.

Overall, loans in key areas maintained rapid growth. At the end of June, inclusive small and micro loans and medium- and long-term loans in the manufacturing industry increased by 16.9% and 18.1% year-on-year respectively, and green loans increased by 28.5% year-on-year, both exceeding the growth rate of all loans.

An industry expert pointed out that the central bank has grasped the key point of the housing rental industry. The report explains the necessity and feasibility of financial support for the housing rental industry through a special column, which is conducive to taking into account both the current and long-term.

In the short term, the current real estate market is also in a special period of adjustment. Many new houses cannot be sold and second-hand properties are vacant. Increasing support for the housing rental industry will help to revitalize existing stocks and destock, balance supply and demand in the real estate market, and stabilize expectations.

In the long run, my country no longer has a shortage of housing in terms of total volume, but there is still room for adjustment in structure. New citizens and young people want to rent "good houses"; insisting on renting and selling at the same time, supporting more and more high-quality housing rental companies to enter the market, and developing the housing rental industry, these are all important directions for the future new real estate model.

The report emphasizes that rent is the core variable that affects housing value. The value of housing mainly comes from the discount of future rent, which determines the base price and foundation of real estate. The "rent-to-sale ratio" indicator often mentioned in the market has generally rebounded in recent years, and the impact of future rent growth will gradually become apparent.

Market analysts pointed out that for a given purchase cost, the total rental-to-sale ratio and the future rental growth rate can reflect the total yield of rental housing. Currently, many cities and areas with strong rental demand have reached more than 3%, which is higher than the return on most assets. From an international comparison, after excluding property taxes, the rental-to-sale ratio in the United States and Japan is more than 4%, and the United Kingdom is around 3.5%. With the in-depth development of the domestic housing market and the diversification of living concepts, there will be more choices for renting houses, and there is still room for improvement in my country's rental yield.

The report believes that my country's housing rental business is still in its infancy and the market development model is still in the exploratory stage. The central bank has timely introduced a new tool for affordable housing refinancing to support enterprises to purchase existing housing in batches for use as affordable housing, which can form economies of scale relatively quickly. At the same time, many places are also providing policy support in terms of finance, taxation, land, and supporting facilities, which can help reduce corporate costs and enhance the commercial sustainability of the industry.

With the support of these financial and local fiscal policies, the housing rental market will usher in broader space in the future as the operating capabilities of housing rental companies improve and the market commercialization operates effectively. In the long run, it will also promote the orderly transformation of the real estate industry's development model.

In addition, the report also proposes to take maintaining price stability and promoting a moderate price recovery as important considerations for monetary policy, strengthen policy coordination and cooperation, and keep prices at a reasonable level.

Daily Economic News