Source: Securities Times Author: Zhang Da

On June 26th, Beijing Housing and Construction Commission and four other departments jointly released new policies to stabilize the housing market. Among them, it was proposed to clearly implement the minimum down payment ratio and interest rate floor for commercial personal housing loans, adjust the minimum down payment ratio for personal housing loans for housing provident funds, support the demand for improving housing for families with multiple children and increase the amount of housing provident fund loans for purchasing green buildings, prefabricated buildings or ultra-low energy consumption buildings, and organize activities such as the “Old for New” housing policy. The new policy will be implemented from June 27th, 2024.

Industry insiders believe that the package of real estate policies jointly issued by the central bank and other four departments on May 17th shows the determination of the central government to stabilize the housing market, which has significantly boosted market confidence. As core first-tier and second-tier cities gradually implement various measures, the market is expected to enter a period of policy effects realization next.

Beijing Implements New Housing Policies

On June 26th, the Beijing Housing and Construction Commission, the People's Bank of China Beijing Branch, the Beijing Banking and Insurance Regulatory Bureau, and the Beijing Housing Provident Fund Management Center jointly issued the Notice on Optimizing Policy Measures for the Stable and Healthy Development of the Local Real Estate Market.

In accordance with the principle of differentiated policies for different cities, the minimum down payment ratio and interest rate floor for new commercial personal housing loans in Beijing will be adjusted.

Specifically, for the first-time homebuyers, the minimum down payment ratio is no less than 20%, and the interest rate floor is no less than 45 basis points below the corresponding period loan market quotation rate (LPR). The interest rate floor for mortgages with a term of 5 years or more is currently 3.5%.

For the second-time homebuyers, if the property is located within the fifth ring road, the minimum down payment ratio is adjusted to no less than 35%, and the interest rate floor is no less than 5 basis points below the corresponding period loan market quotation rate (LPR). The interest rate floor for mortgages with a term of 5 years or more is currently 3.9%. If the property is located outside the fifth ring road, the minimum down payment ratio is adjusted to no less than 30%, and the interest rate floor is no less than 25 basis points below the corresponding period loan market quotation rate (LPR). The interest rate floor for mortgages with a term of 5 years or more is currently 3.7%.

At the same time, the recognition standards for personal housing loans for commercial and housing provident funds for first-time homebuyers with two or more children in Beijing will be optimized. For families in Beijing with two or more children, the purchase of the second home will be recognized as the first home in personal housing loans.

In addition, the minimum down payment ratio for new personal housing provident fund loans in Beijing will be adjusted. For families of employees who apply for personal housing provident fund loans and purchase their first commodity housing, the minimum down payment ratio will be adjusted to no less than 20%. For families who purchase their second commodity housing, if the property is within the fifth ring road, the minimum down payment ratio is no less than 35%. If the property is located outside the fifth ring road, the minimum down payment ratio is no less than 30%.

At the same time, for employees who apply for personal housing provident fund loans to purchase green buildings rated two stars and above, prefabricated buildings or ultra-low energy consumption buildings, the loan amounts will be increased.

Specifically, for borrowers who apply for personal housing provident fund loans to purchase green buildings rated two or three stars, the loan amounts will be increased by 200,000 and 300,000 CNY respectively. For borrowers who apply for personal housing provident fund loans to purchase prefabricated buildings rated A(BJ), AA(BJ), and AAA(BJ), the loan amounts will be increased by 100,000, 200,000, and 300,000 CNY respectively. For borrowers who apply for personal housing provident fund loans to purchase ultra-low energy consumption buildings, the loan amounts will be increased by 400,000 CNY. In addition, the maximum amount will be limited, and for borrowers who meet multiple applicable conditions mentioned above, the amounts can be accumulated up to a maximum increase of 400,000 CNY, and the maximum loan amount does not exceed 1.6 million CNY.

In addition, the new policy proposes to organize activities such as the “Old for New” housing policy. The Beijing Real Estate Industry Association and the Real Estate Agent Industry Association will build a docking platform to encourage more development companies and brokerage institutions to participate and provide better services for residents who need to replace their old housing. For residents who sell their old houses and buy new ones, real estate agents will give priority to promoting old house transactions. The relevant deposit for the old house that has been successfully sold will be turned into the down payment for the new house. If the old house fails to be sold within a certain period, the development company will unconditionally refund the deposit.

Yan Yuejin, director of the research center of E-House China R&D Institute, believes that the significance of this policy signal in Beijing is very important. As the last city among the four first-tier cities in China to adjust the real estate loan down payment ratio and interest rate policy, it also means that the policies of all the four first-tier cities have been adjusted positively as a whole, which has created a very good environment for relaxed home-buying conditions in the second half of the year. It also helps to boost the market confidence of homebuyers and has a positive effect on the subsequent market trend.

New policies landed rapidly in the four first-tier cities.

All four first-tier cities have implemented the “5.17” new housing market policy.

On May 27, Shanghai took the lead in implementing the '5.17' new policy, significantly relaxing the real estate market policy. Among them, the threshold for non-Shanghai household purchasing was greatly reduced. The social security or personal income tax payment period was reduced from 5 years to 3 years. Non-Shanghai single individuals could buy new buildings outside the Outer Ring Road and second-hand buildings throughout the area instead of only being able to buy outside the Outer Ring Road. The social security requirements for new cities, Lingang and other areas have been reduced to 2 years and 1 year, respectively, and multi-child families can purchase an extra house. At the same time, the down payment for commercial loans was reduced significantly. The down payment for the first apartment was reduced from 30% to 20%, the down payment for the second apartment was reduced from 50% to 35%, and the key six districts were lowered to 30%. The commercial loan interest rate for the first apartment was reduced from 3.85% to 3.5%, and the second apartment was reduced from 4.25% to 3.9%. The key six districts were reduced to 3.7%, significantly reducing the cost of purchasing mortgages. In addition, the family provident fund loan amount was adjusted from 1.2 million yuan for the first apartment to 1.6 million yuan, and the loan amount for the second apartment was adjusted from 1 million yuan to 1.3 million yuan. The loan amount for multi-child families increased by 20%.

On May 28, Guangzhou followed up with the implementation of new real estate policies, among which it proposed to optimize and adjust the purchase restriction policy. Non-Guangzhou household residents and single individuals in the purchasing restricted area could present a social security or personal tax payment period of 6 months instead of the original 2 years, while also enjoying the residency treatment for local household residents. At the same time, the minimum down payment for commercial loans for the first apartment was reduced from 30% to 15%, and the down payment for the second apartment was reduced to 25%, while the lower limit of the interest rate for the first and second commercial loans was canceled. In addition, the two-year restriction on resale was lifted. In addition, for families who have two or more houses and have already cleared the purchase loan, and applied for a loan to purchase a house, the bank and financial institutions can prudently determine the down payment ratio and loan interest rate level according to factors such as the borrower's solvency and credit status.

On the same day, Shenzhen announced that it would lower the minimum down payment percentage and the interest rate lower limit for personal housing loans from May 29th. The minimum down payment for the first apartment was reduced from 30% to 20%, and the minimum down payment for the second apartment was reduced from 40% to 30%. The lower limit of the interest rate for commercial loans for the first apartment was lowered from the original LPR-10BP to LPR-45BP, and the lower limit of the interest rate for commercial loans for the second apartment was lowered from the original LPR+30BP to LPR-5BP.

On June 26, the Beijing Housing and Urban-Rural Development Commission and four other departments jointly issued a new policy to stabilize the real estate market. It clearly implements the adjustment of the minimum down payment percentage and the interest rate lower limit for commercial personal housing loans, adjusts the minimum down payment percentage for housing provident fund personal housing loans, supports the demand for multi-child families to improve their housing conditions, increases the housing provident fund loan amount for purchasing green buildings, prefabricated buildings, or ultra-low energy-consumption buildings, organizes the implementation of the housing exchange activities and other policy measures. The new policy will be implemented on June 27, 2024.

Meng Xinzeng, an analyst at China Index Academy, believes that the implementation of the '5.17' package real estate policy shows the central government's determination to stabilize the real estate market. It has significantly boosted market confidence. As the core first-tier and second-tier cities gradually implement various measures, the market is expected to enter a period of policy implementation. At the same time, real estate companies will enter the sprint phase of the first half of the year in June. The market activity is expected to rebound, but it is worth noting that the pace of market recovery still depends on the change in residents' income expectations. In addition, if the policy of local SOEs to collect and store unsold commodity houses that have been completed can be implemented quickly, it will also play a positive role in improving the cash flow of real estate companies and resolving industry risks.

Editor/Lambor