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cailianshe news, september 19 (reporter li jie)the federal reserve's interest rate cut, which came after a four-year absence, is seen as sending a positive signal to the market.

on september 19, the federal reserve held a meeting to cut interest rates by 50 basis points, lowering the federal funds rate to 4.75-5.00%. analysts believe that this may mean that the united states will enter the interest rate cut channel.

"the fed's rate cut this time is quite large. according to the published dot plot, there is still an expectation of a 50bp rate cut later this year, which means that the federal funds rate may drop to 4.25-4.5% by the end of the year," said chen wenjing, director of market research at china index academy.

what impact will the fed’s interest rate cut have on the domestic real estate market?

affected by the positive factors of the federal reserve's interest rate cut, many real estate stocks including vanke, gemdale, sunac, shimao group, and china resources land strengthened today.

li yujia, chief researcher at the housing policy research center of the guangdong provincial institute of urban and rural planning, pointed out that the federal reserve's interest rate cut has effectively alleviated the concerns and constraints on the depreciation of the rmb and further decline in rmb asset prices when implementing domestic monetary easing policy decisions.

"this indicates that the channel for subsequent reserve requirement ratio and interest rate cuts will be wider, and there will be more room for further regulation of domestic mortgage rates. this will have a positive impact on easing developers' tight capital chain, reducing home buyers' mortgage costs, and promoting housing demand," said li yujia.

yan yuejin, deputy director of the e-house research institute, believes that the fed's interest rate cut will also be beneficial to domestic monetary policy, macroeconomics and industrial economy. among them, the impact on mortgage interest rates may be more obvious.

chen wenjing also believes that the fed's interest rate cut will free up more room for my country's subsequent monetary policy adjustments. it is expected that my country's subsequent reserve requirement ratio cuts and interest rate cuts will be implemented more quickly, which will help further reduce corporate financing costs. "for the real estate market, the lpr for more than five years is expected to be further reduced, and the cost of buying a house for residents may also decrease accordingly."

domestic interest rate cut expectations strengthen

"after the fed cut interest rates, domestic expectations for interest rate cuts have strengthened based on the current economic situation, and the market also expects that the extent of the adjustment may not be small," said zhang dawei, chief analyst at centaline property.

in interpreting the august financial statistics, the head of the relevant department of the central bank said, "we will start to introduce some incremental policy measures to further reduce corporate financing and household credit costs and maintain reasonable liquidity."

in this regard, yan yuejin believes that the probability of an lpr interest rate cut will increase from september this year to the end of the year. if the cost of mortgage loans drops further at that time, it will help reduce the cost of buying a house and boost the willingness to buy houses.

in fact, since the implementation of the "517 new policy", the interest rates on first and second home mortgage loans have continued to decline.

statistics from the china real estate research institute show that in august 2024, the national average interest rate for first-home mortgages had fallen to around 3.25%, and the average interest rate for second-home mortgages was 3.6%.

at present, the interest rates for first-time home loans in most cities have dropped to between 2.9% and 3.4%. among them, the highest mortgage rates for more than five years are in beijing and shanghai, both at 3.4%, and guangzhou as low as 2.9%; second-tier cities generally have an interest rate of 3.1%, and nanjing as low as 2.95%.

zhang dawei believes that in an environment of loose capital, it is expected that the mortgage policies of some small joint-stock banks may be comprehensively relaxed in the future, and mortgage interest rates may enter the "2-digit range."

regarding the interest rates on existing mortgage loans, yan yuejin said that indirectly, the fed’s interest rate cut may help further lower the interest rates on existing mortgage loans.

the financing environment for real estate companies may improve

from the perspective of revitalizing the existing real estate market, some analysts believe that the fed's interest rate cut will help attract foreign capital into the chinese market, and large-scale investment in the real estate sector is expected to heat up.

"in terms of opportunities, after three years of deep adjustments in the real estate industry, the prices of existing real estate assets have undergone significant adjustments and have basically fallen to the bottom. this has created good conditions for investment institutions to subsequently carry out acquisitions and revitalize existing assets," said yan yuejin.

currently, under the overall institutional framework of "activating existing assets and optimizing new assets", it is expected that the opportunities and demand for revitalizing existing commercial real estate will increase in the future.

at the same time, many real estate industry analysts said that the fed’s interest rate cut will be beneficial to both existing and newly issued us dollar bonds.

zhang dawei said that for domestic real estate companies, their overseas financing costs will be reduced in the future. "the possibility of rmb appreciation is increasing, which will reduce the pressure on real estate companies to repay overseas debts and may help them increase their financing scale and reduce their financing costs, which will in turn be beneficial to the capital turnover and project development of real estate companies.

as financing channels improve, real estate companies' enthusiasm for land acquisition may increase.

"in 2024, the overall enthusiasm of real estate companies to acquire land will decrease. if we also make further optimization in loan interest rates, the financing environment of some real estate companies will continue to improve, and their willingness to acquire land may improve slightly." said a real estate industry analyst.

"the fed's interest rate cut is usually seen as a signal that global economic policies are shifting towards easing, which will affect domestic home buyers' expectations for the real estate market. the market may believe that the economic environment will be more conducive to the development of the real estate market, and expectations for rising housing prices will increase, thereby further stimulating housing demand. however, if home buyers still have concerns about the future economic situation, this improvement in expectations may be subject to certain limitations," said zhang dawei.

in this regard, li yujia pointed out that although domestic expectations for reserve requirement ratio and interest rate cuts have strengthened, considering the current sluggish prices of industrial products, the real interest rate is still relatively high. it remains to be seen whether the return on real investment can exceed the real interest rate.

"therefore, although the fed's interest rate cut will have an indirect positive impact on the domestic market, in the short term, we should not have overly high expectations for the actual impact on real estate, whether it is real estate companies investing or residents purchasing houses with mortgages," li yujia added.