Source: Wind

On May 17, the central bank announced a package of new real estate finance policies, clearly abolishing the lower limit of mortgage interest rate policies at the national level, lowering the mortgage down payment ratio and interest rate on provident fund loans, and establishing affordable housing reloans.

On the same day, a video conference on effectively securing housing across the country proposed that in cities with a large inventory of commercial housing, the government may need to order and buy some commercial housing at reasonable prices as appropriate for use as affordable housing.

Subsequently, housing provident fund centers in many places responded positively to the central government policy, lowered interest rates on provident fund loans one after another, and also gave detailed explanations on stock loans.

According to information from First Finance, after many local governments relaxed or lifted purchase restrictions one after another, the popularity of the property market picked up. New housing sales increased in cities such as Hangzhou, Shenzhen, and Beijing, and there was a marked increase in housing volume with intermediaries. Some potential buyers are also waiting for stronger real estate support policies to be introduced, and there is a “wait and see” mentality. After the introduction of a package of policies, it will meet the policy expectations of buyers to a certain extent, and is expected to form a “policy base” for the real estate market.

Beijing: No application required, automatic downgrade

According to the business questions and answers issued by the Beijing Housing Provident Fund Management Center, Beijing has now implemented a reduction in loan interest rates. Currently, the interest rate for the first personal housing provident fund loan under 5 years (including 5 years) is adjusted to 2.35%, and to 2.85% for 5 years or more.

Interest rates for a second set of personal housing provident fund loans under 5 years (including 5 years) and 5 years or more were adjusted to no less than 2.775% and 3.325%, respectively.

For personal housing provident fund loans issued before May 18, 2024, the original interest rate standards for personal housing provident fund loans will still be implemented, and the adjusted interest rate standards for personal housing provident fund loans will be implemented from January 1, 2025.

For personal housing provident fund loans that have been accepted before May 18, 2024 and those accepted after May 18, 2024 (inclusive), the adjusted interest rate standards for personal housing provident fund loans will be implemented.

In addition, the staff at the Beijing Housing Provident Fund Management Center explained that the lender does not need to apply separately, and the loan interest rate will automatically be lowered. If the lender does not change the monthly repayment amount, it will automatically be calculated as more principal repayment and less interest.

Shanghai: Stock loans with a term of 1 year or more, discounts will be implemented next year

The Shanghai Provident Fund Center announced that according to the People's Bank of China's decision, interest rates for personal housing provident fund loans under 5 years (including 5 years) and 5 years will be reduced to 2.35% and 2.85% respectively, and interest rates for personal housing provident fund loans under 5 years (including 5 years) and 2 years or more will be reduced to 2.775% and 3.325%, respectively.

The adjusted interest rate for loans issued after May 18, 2024 (inclusive);

For loans already issued before May 18, 2024, the interest rate of the original loan contract will be implemented. For loans with a term of 1 year or more, the adjusted interest rate will be implemented from January 1, 2025.

Shenzhen: Interest rate adjustments for stock loans after July 1

The Housing and Construction Bureau of Shenzhen Municipality said that personal housing provident fund loans applied for and not issued before May 18, 2024, and personal housing provident fund loans applied for after May 18, 2024 (inclusive) will all implement adjusted interest rates.

For loans that have already been issued, according to Article 23 of the “Shenzhen Housing Provident Fund Loan Administration Regulations”, if interest rates on national provident fund loans are adjusted after the Provident Fund loan is issued, the Provident Fund Center shall adjust the loan interest rate on a quarterly basis.

Personal housing provident fund loans already issued by our city before May 18, 2024 will implement adjusted interest rates starting July 1, 2024.

Guangzhou: Lowering Interest Rates on Personal Housing Provident Fund Loans

The Guangzhou Housing Provident Fund Management Center issued a notice on the 17th stating that starting from May 18, 2024, interest rates on personal housing provident fund loans will be lowered by 0.25 percentage points, interest rates for the first set of personal housing provident fund loans under 5 years (including 5 years) and 5 years or more will be adjusted to 2.35% and 2.85% respectively, and interest rates for second personal housing fund loans under 5 years (including 5 years) and above will be adjusted to no less than 2.775% and 3.325%, respectively.

For personal housing provident fund loans issued from May 18, 2024, the new interest rate will be implemented; for personal housing provident fund loans issued before May 18, 2024, the new interest rate will be implemented from January 1, 2025 as agreed in the loan contract.

Fuzhou City, Fujian Province: Lowering Interest Rates on Personal Housing Provident Fund Loans

On May 17, the Fuzhou Housing Provident Fund Center issued a notice: According to the “Notice of the People's Bank of China on Lowering Interest Rates on Personal Housing Provident Fund Loans”, starting from May 18, 2024, the interest rates on personal housing provident fund loans will be reduced by 0.25 percentage points, and interest rates for the first personal housing fund loan under 5 years (including 5 years) and 2.5% (2.6% and 3.1% before the adjustment, respectively), and the interest rates for the second set of personal housing provident fund loans of 5 years or more will be adjusted to no less than 2.775%, respectively. 3.325% (3.025% and 3.575% before adjustment, respectively).

The specific implementation rules are: for personal housing provident fund loans issued before May 18, 2024, the adjusted interest rate will be implemented starting January 1, 2025; for personal housing provident fund loans applied for but not issued before May 18, 2024, the adjusted interest rate will be implemented; for personal housing provident fund loans applied for after May 18, 2024, the adjusted interest rate will be implemented.

Hainan Province: Lowering Interest Rates on Personal Housing Provident Fund Loans

The Hainan Provincial Housing Provident Fund Administration issued a relevant notice. According to the People's Bank of China's “Notice on Lowering Interest Rates on Personal Housing Provident Fund Loans”, Hainan Province will reduce personal housing provident fund loan interest rates by 0.25 percentage points starting May 18.

Starting May 18, interest rates for the first set of personal housing provident fund loans under 5 years (including interest rate loans) and 5 years or more were adjusted to 2.35% and 2.85%, respectively, and interest rates for the second set of personal housing provident fund loans under 5 years (including interest rate loans) were adjusted to 2.775% and 3.325%, respectively.

Personal housing provident fund loans (including interest-discounted loans) issued after May 18 (inclusive) (including loans with interest discounts) will be implemented according to the adjusted new interest rate; personal housing provident fund loans (including interest-discounted loans) issued before May 18 will implement the new interest rate as of January 1, 2025 according to regulations.

Interest rates on personal housing provident fund loans have been lowered in many ways

According to incomplete statistics, recently, Hunan, Hubei, Nanjing, Shaanxi, Henan, Hefei, Suzhou, Dongguan, Jiangmen and other places also responded positively to the People's Bank of China's notice and announced a reduction in interest rates on provident fund loans.

What is the impact of the agency's interpretation?

Industry insiders believe that a series of new policies that work simultaneously on both the supply and demand sides of real estate will help absorb existing real estate, optimize incremental housing, reverse the current situation of weak demand in the real estate market, and push the real estate industry to a new development model.

Yan Yuejin, research director of the Yiju Research Institute, said that the policy will continue to have an impact. It will have a positive effect on this week's market transactions, next week's real estate market conditions, the promotion of homebuyers' market confidence, and the overall improvement in the financial situation of housing enterprises. It fully reflects the country's attention and support for the real estate market, and the foundation for the positive development of the real estate market continues to grow.

Wang Qing, chief macro analyst at Dongfang Jincheng, believes that down payments and mortgage interest rates are the keys to influencing the direction of the property market and directly determine residents' housing purchase costs and expectations for the future property market. Judging from the content of the policy, the favorable policy greatly exceeded market expectations and sent a strong signal to support the real estate industry to achieve a “soft landing” more quickly. It is expected to have a strong boosting effect on the property market in the short term.

Zhang Dawei, chief analyst at Central Plains Real Estate, explained that the current LPR for a term of 5 years or more is 3.95%. According to the previous minimum reduction of 20 basis points, the interest rate for the first home loan can reach 3.75%. The current policy abolishes the lower interest rate limit for commercial loans, and there is more room for interest rate cuts.

Zhang Dawei explained that with the exception of a few first-tier and second-tier cities, the lowest initial mortgage interest rate in most cities has now entered the “3.45 era. By simple calculation, it is equivalent to a reduction of 4,631 yuan from the minimum of 4,631 yuan before the 30-year monthly payment of 1 million yuan to 4,462 yuan, a monthly monthly salary reduction of 167 yuan, and the total reduction in interest over 30 years reached 60,686 yuan.”

Wen Bin, chief economist at China Minsheng Bank, believes that although mortgage interest rate restrictions are basically liberalized, there is still a certain difference between the down payment ratio for the first home and the second home, and the first home is clearly lower. Furthermore, according to the policy principle of inner-city policies, it is expected that some hot cities will maintain lower mortgage interest rates for the time being. These help balance the current stability and long-term development of the real estate market, and avoid returning to the old path of “relying on real estate to drive the economy.”

The Huatai Securities real estate team believes that from the perspective of industry fundamentals, policy combinations, especially mortgage interest rate policy adjustments, are expected to restore industry expectations, thereby opening up room for industry valuation repair. The government's collection and savings policy, on the other hand, tends to favor local urban investment platforms. Since 2021, urban investment platforms have heavily supported the land market, so the land currently held or idle inventory is at a high level. We expect that local governments may follow the following order in selecting collection and storage projects: 1. Inventory projects of local urban investment platforms; 2. Projects owned by housing enterprises (especially central state-owned enterprises) participating in the local land market; 3. Projects that have already been built and have no debts. Overall, we believe that through this round of storage, local urban investment platforms are expected to improve their own supply and demand structure and debt situation.

The macro research team of Zheshang Securities said that the current real estate policy supports the real estate supply side's attitude, and there has been no trend reversal in the judgment that real estate has entered a new era. Theoretically, there is a high correlation between economic growth and credit growth. Combined with the current round of social finance, credit, and the “shift” of M2 growth, the core behind this is the dual idea of removing “moisture” from capital idling and economic structural transformation. Regarding the reason for the slowdown in the growth rate of total credit, the central bank's column in the monetary policy implementation report also highlighted three points: 1) economic structural transformation; 2) large credit stocks, where supply exceeds demand; 3) development of direct financing channels to replace credit channels.

The key to mapping a low growth rate is to match the endogenous needs of the economy in the context of high-quality economic development; in the new era of real estate, the traditional credit leniency framework also needs to be iterated, and “high quality+low growth rate” may be superior to “low quality+high growth rate.”

Editor/jayden