the central bank's "combination punch" to stabilize the property market sends a positive signal
2024-09-25
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original title: the central bank's "combination punch" to stabilize the property market sends a positive signal
experts and industry insiders said that the release of a number of major policies to reduce the burden of buying houses will help promote consumption and ease the cash flow pressure on real estate companies.
at a press conference held by the state council information office on september 24, pan gongsheng, governor of the people's bank of china, announced the upcoming macro-monetary policy, including lowering the reserve requirement ratio and policy interest rate, and leading the market benchmark interest rate downward; lowering the interest rate on existing mortgage loans and unifying the minimum down payment ratio for mortgage loans; creating new policy tools to support the development of the stock market; and supporting the acquisition of existing land from real estate companies to ease their financial pressure.
in this regard, industry insiders believe that the central bank's release of heavy mortgage and financial policies is a rare "gift package" given by the financial sector to the real estate market on the eve of national day. policies such as reducing existing mortgages, reducing down payments, and reducing reserve requirements will play a positive role in reducing home purchase costs, continuously enhancing home purchase confidence, and continuously reducing the risks of existing mortgages. according to rough estimates, if the interest rate of existing mortgages is reduced by 50 basis points, for a loan principal of 1 million and a 30-year equal principal and interest repayment method, the monthly payment can be reduced by about 280 yuan, and the total interest expenditure can be reduced by about 100,000 yuan in 30 years.
focus on reducing the cost of buying a house
lowering the interest rates on existing mortgage loans will reduce the monthly payment burden for homebuyers
pan gongsheng said that the interest rates on existing mortgage loans will be lowered, and commercial banks will be guided to lower the interest rates on existing mortgage loans to around the interest rates on newly issued mortgages. the average drop is expected to be around 0.5 percentage points.
since 2024, the central bank has lowered the lpr (loan market benchmark rate) for terms of more than five years twice by a total of 35 basis points to 3.85%. at the same time, it has canceled the national floor rate for the first and second home mortgages. currently, except for beijing, shanghai and shenzhen, all other cities in the country have canceled the floor rate.
according to statistics from centaline property research institute, the current average interest rate for existing mortgages is around 3.92%, while the average interest rate for new mortgages is around 3.3%, which means that the average interest rate spread between existing and new mortgages is more than 60 basis points. the gap between the interest rates of existing and new mortgages has further widened, so the call for "lowering the interest rates of existing mortgages" has gradually increased.
the rapid decline in new mortgage rates has led to a further widening of the "scissors gap" between existing and new mortgages, which is an important reason for the central bank to lower the interest rates on existing mortgages. li yujia, chief researcher at the housing policy research center of the guangdong provincial urban planning institute, said: "after the reduction in the interest rates on existing mortgages, it is expected that the phenomenon of early repayment will be significantly alleviated. at the same time, it is a subsidy for ordinary working-class families to support their lives, which is conducive to promoting consumption."
yan yuejin, deputy director of the shanghai e-house real estate research institute, said that this is the second time that the existing mortgage interest rate has been lowered nationwide since the first lowering of the existing mortgage interest rate last year, which will reduce the monthly payment burden for home buyers or mortgage-repaying families.
zhang dawei, chief analyst of centaline property, pointed out: "if the interest rate of existing mortgages is reduced by 50 basis points, it means that the average interest rate difference between existing mortgages and new mortgages will be only 10-15 basis points, which is a big benefit for loan repayers." he said that according to rough estimates, after the mortgage interest rate drops by 50 basis points, the monthly payment of a 30-year loan of 1 million yuan by a buyer with existing mortgage can be reduced by about 280 yuan, and the total interest expenditure can be reduced by about 100,000 yuan in 30 years.
at present, the interest rate for the first mortgage in beijing is 3.4%, the interest rate for the second mortgage is 3.6% for homes outside the fifth ring road, and 3.8% for homes within the fifth ring road. liang wen (pseudonym), a citizen who purchased her first home in 2022, said that the current mortgage rate is 4.5%. if the central bank's new policy is followed, her mortgage rate may be close to 3.4%. if it is reduced by 0.5 percentage points, it will be reduced to 4%. "how much beijing can reduce it and whether the additional points can be cancelled still need to look at the specific policies." liang wen said.
wang qing, chief researcher of orient securities macroeconomics, pointed out that lowering the interest rates on existing mortgage loans will effectively curb the tide of early loan repayments and alleviate its impact on residents' consumption. at the same time, this also sends a positive signal to stabilize the property market and help promote the stabilization and recovery of the property market.
while the interest rates on existing mortgage loans were lowered, the central bank further lowered interest rates and reserve requirements, which also created room for banks to protect their net interest margins.
wang qing calculated that as of the end of june, the balance of commercial bank deposits was 296.5 trillion yuan. this means that if the deposit rate is reduced by an average of 6.4 basis points, it can offset the impact of a 50 basis point reduction in the existing mortgage rate on bank profits and ease the squeeze on bank profits.
lower down payment ratio for second homes to support home improvement
the central bank also launched a "combination punch" against the real estate market. at the press conference, pan gongsheng announced that the minimum down payment ratio for first and second home loans would be unified, and the minimum down payment ratio for second home loans at the national level would be reduced from 25% to 15%.
in this regard, yang chang, chief analyst of the policy team of zhongtai securities research institute, explained: "the unification of the minimum down payment ratio for first and second home loans has further lowered the threshold for home purchases and created conditions for attracting residents to participate in the property market."
at present, my country's real estate market is still in deep adjustment. according to data released by the national bureau of statistics, from january to august this year, the sales area of new commercial housing was 606 million square meters, a year-on-year decrease of 18.0%, of which the residential sales area decreased by 20.4%; the sales of new commercial housing was 5972.3 billion yuan, a year-on-year decrease of 23.6%, of which the residential sales decreased by 25.0%. as of the end of august, the area of commercial housing for sale was 738 million square meters, a year-on-year increase of 13.9%, of which the residential area for sale increased by 21.5%.
yan yuejin believes that reducing the down payment ratio for second sets of houses will drive the entry of improvement-type housing into the market. "regarding the down payment ratio, this time a loose down payment ratio orientation has been implemented for second sets of houses or improvement-type housing. although the down payment ratio for second sets of houses has been lowered in the past, it was slightly higher than that for first sets of houses. however, this reduction to 15% will help to lower the down payment ratio and purchase threshold for second sets of houses or improvement-type housing. a simple calculation shows that if a family subscribes to a second set of houses with a total price of 4 million, the down payment used to be 1 million, but now it has been reduced to 600,000, a direct reduction of 400,000, which naturally activates the demand for improvement or house replacement."
mortgage interest rates in more cities are expected to enter the "2" era
it is worth noting that pan gongsheng also said that the loan market quotation rate and deposit rate should be guided to decline simultaneously to maintain the stability of the net interest margin of commercial banks. this means that interest rates may be cut again this year.
the first rate cut by the federal reserve in four years has strengthened expectations of a rate cut in my country, and the market has speculated that the lpr will be lowered. however, the new lpr remains unchanged. on september 20, the people's bank of china authorized the national interbank funding center to announce that the loan market benchmark rate (lpr) on september 20, 2024 will be: 1-year lpr is 3.35%, and lpr for more than 5 years is 3.85%, the same as in august.
with the central bank announcing new policies, it is highly likely that the lpr will be lowered this year.
yan yuejin believes that there will be a new round of interest rate cuts after the reserve requirement ratio cut. if the net interest margin is stable in the future, the current lpr may be further lowered. at the same time, for existing mortgage loans, the future will also help them to further decline and adjust, so it can play a positive and sustained role.
as the anchor of mortgage rates, the pricing of lpr for terms of more than five years is related to the trend of mortgage rates.
the monitoring data of mortgage interest rates in 45 key cities across the country by rong360 digital technology research institute showed that in august 2024, the average interest rate for first-home mortgages nationwide was 3.29%, flat month-on-month and down 67bp year-on-year; the average interest rate for second-home mortgages was 3.71%, flat month-on-month and down 113bp year-on-year.
specifically, among the 45 key cities monitored, there are 13 cities where the mainstream interest rate for first-time home loans is between 3.05% and 3.2%. foshan, dongguan and wenzhou have the lowest first-time home loan interest rate at 3.05%; there are 22 cities where the mainstream interest rate is between 3.24% and 3.4%; there are 10 cities where the mainstream interest rate is between 3.45% and 3.85%; following the last lpr cut of 10bp to 3.85%, there was no city with a first-time home loan interest rate higher than 3.85% in august.
ai yawen, senior analyst at rong360 digital technology research institute, said that there may be opportunities for mortgage rates to be lowered this year. the central bank has abolished the national floor for commercial personal housing loan rates for the first and second homes, giving local governments greater room for independent adjustment. in order to compete for mortgage market share, commercial banks are also actively lowering mortgage rates to attract customers. the interest rates on personal housing provident fund loans have also been lowered, creating conditions for further reductions in mortgage rates.
it is worth noting that the first mortgage rates in guangzhou, suzhou, foshan and nanjing have already entered the "2" digit. "there is still a lot of room for full entry into the '2' era. it is expected that second- and third-tier cities may continue to follow suit and lower their rates in the future, and are expected to be the first to enter the '2' era," said ai yawen.
focus on helping real estate companies
the reduction in the reserve requirement ratio will release 1 trillion yuan of liquidity, and the cash flow pressure on real estate companies will be alleviated
at the press conference, pan gongsheng announced that the deposit reserve ratio and policy interest rate would be lowered, and the market benchmark interest rate would be driven downward.
pan gongsheng said that the deposit reserve ratio will be lowered by 0.5 percentage points in the near future to provide about 1 trillion yuan of long-term liquidity to the financial market; depending on the market liquidity situation, the deposit reserve ratio may be further lowered by 0.25-0.5 percentage points this year.
at the same time, pan gongsheng said that the central bank's policy interest rate, that is, the 7-day reverse repurchase operation rate will be lowered by 0.2 percentage points, from the current 1.7% to 1.5%. at the same time, the loan market benchmark rate and deposit rate will be guided to decline simultaneously to maintain the stability of the net interest margin of commercial banks.
yan yuejin analyzed that this policy means that the central bank has started a new round of reserve requirement ratio cuts, which will play a positive role in injecting market liquidity, and will also help to increase bank liquidity and enhance banks' lending capacity to a large extent.
"the early announcement of the reserve requirement ratio cut has strong signal guidance and expectation guidance significance. it makes it clear that the reserve requirement ratio may be further lowered at an appropriate time based on market liquidity conditions. this also shows that the loose liquidity environment will be further released, which will help to continuously promote the subsequent easing of monetary and financial markets and loan markets." yan yuejin said.
in january this year, the central bank announced that it would lower the deposit reserve ratio of financial institutions by 0.5 percentage points from february 5, 2024, providing approximately 1 trillion yuan of long-term liquidity to the market.
the central bank has lowered the reserve requirement ratio again this year and may continue to do so in the future, which will undoubtedly have a significant impact on various industries including real estate.
zhang bo, director of the 58 anjuke research institute, said that this reserve requirement ratio cut came after the federal reserve announced a rate cut, which also indicates that my country's move to further release liquidity to the market is accelerating. by optimizing the capital structure of financial institutions, it will further enhance financial service capabilities, better support the recovery of the real estate industry, and promote steady economic operation.
zhang bo further stated that for the real estate market, through this rrr cut, the cash flow pressure of real estate companies will be further relieved, which will help boost market confidence, actively prevent risks in the real estate market, and promote the stable and healthy development of the real estate market. the pace of implementation of the real estate financing coordination mechanism and the support intensity will be further increased, and real estate companies will be more likely to obtain development loans overall, and the financing cost is expected to be further reduced, which will play an important role in ensuring the delivery of buildings and accelerating the market layout of high-quality real estate companies. at the same time, mortgage interest rates are expected to be further reduced, and the approval and loan issuance speed will also be accelerated accordingly, which will be able to meet housing demand more quickly.
"at the same time, the liquidity released by the reserve requirement cut may be seen by investors as a signal of the government's support for economic growth. this expectation may stimulate investors' confidence in domestic bulk assets and promote the growth of such investment demand," said zhang bo.
it is worth noting that at this press conference, pan gongsheng also introduced that the two policy documents, commercial property loans and "16 financial articles" that are due to expire before the end of the year, will be extended to the end of 2026.
the "16 financial measures" are known as the "strongest policy support" in 2022. they involve 16 measures in total, including real estate development loans, personal loans, extension of existing financing, trust financing, bond financing, special loans for guaranteed delivery of buildings, protection of personal credit, extension of the loan concentration system, and housing rental finance. the content is comprehensive and the force is powerful.
the announcement of the extension of the "16 financial measures" will have a positive impact on real estate financing, resolving risks for real estate companies, and supporting the delivery of buildings.
the "special bonds + bank loans" model supports the acquisition of real estate companies' existing land
pan gongsheng said that the central bank will support the acquisition of real estate companies' stock of land. on the basis of using some local government special bonds for land reserves, the central bank will study allowing policy banks and commercial banks to lend to qualified companies to purchase real estate companies' land in a market-oriented manner, revitalize stock of land, and ease the financial pressure of real estate companies. if necessary, the people's bank of china can provide policy support.
regarding the central bank's statement on the acquisition of stock land, yan yuejin believes that the central bank has clarified a series of policies to revitalize stock land, which is to further implement the work orientation of "revitalizing stock and optimizing increments". at the same time, this also means that the work of revitalizing the stock land of real estate companies will enter the substantive stage. especially in terms of policy tools, two policy tools have been very clear this time, namely the "special bonds + bank loans" model. this has significantly enhanced the ability and strength of fiscal and financial resources to revitalize stock land. from this perspective, the support for revitalizing stock land has been significantly strengthened.
li yujia said that the study on allowing policy banks and commercial banks to provide loans to support qualified enterprises in the market-based acquisition of land by real estate companies was a deployment made at the "may 17" meeting. in fact, it is to help troubled enterprises and provide financial support.
on may 17 this year, at the regular policy briefing held by the state council information office, dong jianguo, vice minister of the ministry of housing and urban-rural development, proposed to properly dispose of and revitalize the stock of land. the stock of land that has not yet been developed or has been started but not completed should be properly disposed of and revitalized through government acquisition, market circulation transfer, and continued development by enterprises, so as to help real estate companies alleviate difficulties and reduce debts and promote efficient use of land resources.
at that time, liu guohong, vice minister of the ministry of natural resources, revealed that the government was preparing to introduce policy measures to properly dispose of idle land and revitalize existing land, and to support local governments in properly disposing of idle existing residential land that had been sold through methods such as recovery and acquisition based on actual conditions.
liu guohong introduced that there are three main aspects to revitalize the stock of land. on the one hand, we must support enterprises to optimize development, eliminate obstacles to development and construction, reasonably exempt liability for breach of contract caused by natural disasters and epidemics, and allow enterprises to reasonably adjust planning conditions and design requirements in accordance with procedures to better adapt to market demand. on the other hand, we must also promote market circulation and transfer, give play to the role of the secondary land market, support advance registration transfer and "transfer with mortgage", and encourage transfer or cooperative development. the third is to support local governments in accordance with the principle of "ordering according to needs" to recover idle land at a reasonable price for the construction of affordable housing, and promote it from aspects such as increasing financial support, providing tax support, and simplifying work processes.
regarding the central bank's mention that some local government special bonds will be used for land reserves, yan yuejin said that in the past, special bonds "involving housing and land" were subject to strict boundary control, but this year the support has been significantly strengthened. in fact, it is also a fiscal tool to digest real estate companies' inventory of houses and undeveloped land.
"when using special bonds, local banks can implement supporting policies, which will help leverage such land acquisitions and digest existing land more quickly. objectively, it will have a positive effect on digesting real estate companies' inventory and accelerating capital recovery, and will be beneficial to resolving real estate companies' subsequent debt pressure and operating with ease," said yan yuejin.
strengthening policy incentives is needed to revitalize stock land and inefficient land
in li yujia's view, currently, special bonds are used for land acquisition and storage, mainly for affordable housing land, to solve the problem of insufficient funds for local governments to add new affordable housing land reserves. this is an existing policy. as for the designated use of special bonds, it was originally used for new infrastructure, and now the scope has been expanded to affordable housing. in the future, it may be expanded to industrial-city integration, park development, etc., "but if it is to be expanded to commercial housing land, it will probably be a bit difficult."
li yujia further explained that the current problem is that many developers' stock of land has been mortgaged, and it is difficult to repay debts. some have hidden debts that are difficult to discharge. in addition, developers are unwilling to sell at very low prices. even if they want to sell, few entities enter the market to buy. on the one hand, there are cheap and well-located plots of land in the land auction market. on the other hand, some of the original plots have supporting construction, commercial offices or self-holding. under the market conditions at the time, these planning requirements were affordable, but now it is difficult to afford, and it is difficult to modify the plan.
it can be seen from this that the revitalization of existing land and low-efficiency land involves many land rights holders, complex interest relations, large capital investment, and a long revitalization cycle. the enthusiasm of business entities needs to be improved, and policy incentives need to be further strengthened.
in addition, at the press conference, pan gongsheng stated that this time the main support will be given to the risk management and healthy development of the real estate market from a financial perspective. in the future, the people's bank of china will continue to improve the macro-monetary policy of real estate.
at the same time, li yunze, director of the state financial supervision and administration, also stated at the press conference that he would guide banking and insurance institutions to actively cooperate in resolving real estate and local government debt risks.
the real estate market welcomes a "big gift package"
pan gongsheng, governor of the people's bank of china
announced at the state council information office press conference on september 24
● reduce the interest rates on existing mortgages and unify the minimum down payment ratio for mortgages, and guide commercial banks to lower the interest rates on existing mortgages to around the interest rates on newly issued mortgages. the average reduction is expected to be around 0.5 percentage points.
● unify the minimum down payment ratio for first and second home mortgages, and reduce the national minimum down payment ratio for second home mortgages from 25% to 15%.
● the two policy documents, commercial property loans and “16 financial measures” that are due to expire before the end of the year, will be extended to the end of 2026.
● support the acquisition of real estate companies' stock of land. on the basis of using some local government special bonds for land reserves, research is being conducted to allow policy banks and commercial banks to lend to support qualified companies in the market-based acquisition of real estate companies' land, so as to revitalize stock of land and ease the financial pressure on real estate companies. if necessary, the people's bank of china can provide policy support.
