assessment of the multi-level impact of the new real estate finance policy on the real estate industry
2024-10-01
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(the author of this article, chen cong, is chief analyst of infrastructure industry at citic securities)
we believe that lowering the lpr will help further reduce residents’ financial burden for home purchases. the decline in existing mortgage loan interest rates will not only help improve residents’ spending power, but will also help reduce early repayment behavior and weaken the selling pressure of second-hand houses. extending the validity period of the 16 financial articles and the property management loan policy, and increasing the proportion of the people's bank of china's investment in re-loans for affordable housing will help win the battle to ensure housing delivery and help stabilize the real estate financial order. all in all, the new policy will help stimulate the release of residents' demand for self-occupation and help stabilize the operation of the real estate market, but there is still uncertainty about whether housing prices can stop falling.
▍event:
pan gongsheng, governor of the people's bank of china, said at a press conference introducing financial support for high-quality economic development that the central bank will lower the central bank policy interest rate, reduce the 7-day reverse repurchase operation interest rate by 0.2 percentage points, and guide the loan market quotation rate (lpr). ) synchronized downlink. the central bank will guide commercial banks to lower existing mortgage interest rates to near the new mortgage interest rates, and the average reduction is expected to be 50 bps. the minimum down payment ratio for mortgage loans for first and second homes will be unified, and the minimum down payment ratio for second home loans at the national level will be lowered from 25% to 15%. regarding the 300 billion yuan refinancing tool for acquiring existing commercial housing as affordable housing, the central bank’s investment ratio was increased from 60% to 100%. the 16 financial regulations and operating property loan policies that support a stable financing environment for the real estate industry have been extended for two years to the end of 2026.
▍we expect the average interest rate of new mortgage loans to fall to around 3%, and residents’ burden will drop significantly.
according to the people's bank of china, at the end of june 2024, the weighted average interest rate of personal housing loans by financial institutions was 3.45%. considering that mortgage pricing has been steadily declining recently, and the central bank's policy interest rate is expected to lower the lpr by about 20 bps, we believe that by the end of 2024, the interest rate of new mortgage loans in my country will be reduced to about 3%. assuming that the applicable interest rate for residents who need to bear a mortgage loan of 1 million yuan has dropped by 70 bps, from 3.7% to 3% due to the policy since 2024, we estimate that the monthly payment burden of relevant residents is expected to drop by 6% (based on equal principal and interest over 20 years) (estimated), coupled with the recent decline in housing prices, this is expected to enhance the possibility of releasing owner-occupied demand.
▍the reduction in existing mortgage interest rates will help reduce the selling pressure of second-hand housing caused by early loan repayments, and related adjustments may have a greater marginal impact on first-tier cities.
after the people's bank of china abolished the lower limit on mortgage interest rates, the pricing difference between existing mortgage loans and new mortgage loans has become even greater, which has also led to early loan repayments. this time the central bank guided commercial banks to lower existing mortgage interest rates. according to the central bank's prediction, it will benefit 50 million households with a population of 150 million, reducing interest expenses by an average of 150 billion yuan per year. of course, due to the large differences in mortgage pricing in different regions, the existing mortgage loan interest rates in first-tier cities in beijing, shanghai, guangzhou and shenzhen are the highest, so the marginal impact of adjustments to housing loan policies on residents in first-tier cities may be greater. we believe that a small number of residents may accelerate the sale of second-hand houses in order to repay high-priced mortgage loans in advance. after the existing mortgage interest rates are adjusted, this passive house selling behavior may decrease.
▍national commercial housing loans no longer distinguish between first-time and second-time home buyers, which is in line with the new characteristics of the supply and demand situation in the real estate market.
since the criteria for identifying first-time homes have been significantly relaxed before, the proportion of second-home purchases in mortgage loans is relatively low, and we estimate it to be within 10%. the actual impact of reducing the down payment ratio for second homes is relatively limited, but it matches the new situation and new characteristics of the changing supply and demand relationship in the real estate market. overall, our country's housing supply is no longer in short supply, and we believe there is no need to restrict residents from purchasing second homes nationwide.
▍adjusting the low-income housing refinancing policy according to the actual market conditions and extending the validity period of the 16th financial article and the property management loan policy will help win the battle to ensure the delivery of housing, and will also contribute to the stable and healthy development of the financial market.
in may 2024, the central bank launched a policy of refinancing to support the acquisition of existing commercial housing as affordable housing. however, due to various reasons such as falling rents in various places and limited returns on affordable rental housing, the proportion of 300 billion yuan in re-loans implemented so far is not high. we believe that increasing the proportion of capital contributed by the central bank will help further reduce the cost burden of commercial banks in carrying out this business. although it may weaken the overall scale of funds leveraged by re-lending, it will help promote the implementation of re-lending tools as soon as possible. the 16 articles on property management loans and finance are of great importance to real estate companies in maintaining necessary capital inflows at the project level, and are also closely related to ensuring the delivery of housing. this extension is reasonable. we believe that guaranteed delivery of housing is not guaranteed to be under construction. guaranteed delivery of housing is aimed at the successful completion and delivery of projects with delivery obligations in the later period. it does not involve the unsold portion of the project that has been started, let alone the land reserve that has not been started. the advance receipts of most companies with financial difficulties have dropped significantly by mid-2024. we remain optimistic about the smooth conclusion of the battle to ensure housing delivery.
▍risk factors:
housing prices continue to decline, and residents have formed expectations of downward housing prices, and the expectations may be self-reinforcing. such expectations may further depress companies' sales receivables, thus affecting the effectiveness of policies. the overall marginal changes in the policy, in terms of interest rates, down payment ratios and other factors, are not as severe as in may 2024; although the policy has a cumulative effect and the policy reserve is still sufficient, there is a risk that the policy effect will not be as good as expected.
▍the recovery in trading volume is relatively certain.
there is still uncertainty about whether housing prices can stop falling. financing at the corporate level is transforming to the project level, so land acquisition and development investment are also affected to a certain extent. in contrast, the recovery of the transaction scale of the existing housing and new housing markets is more certain. the replacement of existing housing and the renovation of new housing after delivery are also encouraged by the trade-in policy. we believe that in the real estate industry chain, those who benefit most from the introduction of policies are transaction and decoration service providers. of course, if housing prices can stabilize by the end of 2024, we believe that some leading development companies with core urban land reserves are also in the value investment range.
(this article represents only the author’s personal views)
