On September 5th, the real estate sector in the Hong Kong A-shares market became active again.

In the A-shares market, as of the time of writing, Shenzhen Worldunion Group Incorporated and Beh-Property reached their daily limit up, Beijing Capital Development rose by over 7%, and China Fortune Land Development, Casin Real Estate Development Group, Hefei Urban Construction Development, 5i5j Holding Group, and Financial Street Holdings followed the upward trend.

In the Hong Kong stock market, as of the time of writing, Greentown China rose by over 5%, and China Vanke, Shimao Group, and China Jinmao all rose.

Will the interest rate for existing home loans be lowered?

On the last trading day of August, news of a possible reduction in interest rates for existing home loans sparked a surge in the market and caused real estate stocks to rise. Yesterday, Bloomberg reported, citing informed sources, that China is considering a two-step reduction in interest rates for existing home loans to reduce household debt burdens and boost consumer spending.

According to informed sources, financial regulatory authorities have proposed an overall reduction of about 80 basis points in interest rates for existing home loans nationwide, to be implemented in two steps. The first reduction may take place in the coming weeks, and the second reduction will take effect early next year. The plan may apply to both first-time and second-time home buyers.

Recently, there has been a growing call in the market for a reduction in interest rates for existing home loans. Analysts point out that this move will help alleviate the burden on borrowers of existing home loans, enhance their consumption ability, and promote economic growth, but it will also pose challenges to the profitability of banks.

Tianfeng Securities stated that appropriately reducing the interest rates on existing home loans at the moment may partially unleash the potential of consumer consumption, while also curbing the expansion of 'early repayment' to a certain extent. However, it may have a certain impact on the banking's existing business, and may further exacerbate the shortage of assets and profits.

Of particular note is that various regions are actively promoting the implementation of the 'old for new' housing policy, while also stepping up various supporting policies.

On September 4th, Ganzhou City, Jiangxi Province, issued a notice on 'Several Measures to Further Promote the Stable and Healthy Development of the Real Estate Market', involving 16 measures such as housing provident fund loans, and home purchase subsidies.

On the same day, the Housing and Urban-Rural Development Bureau of Haikou City, Hainan Province, convened a symposium with representatives from local real estate developers. Two new policies were announced during the meeting: first, optimization of the local household registration residents' home purchase policy. Second, encouragement of 'old for new' to meet the demand for home improvement.

On September 1st, Chongqing issued a notice on 'Adjusting and Optimizing Real Estate Transaction Policies', proposing the cancellation of restrictions on the sale of newly purchased homes, optimization of housing unit identification standards, support for 'old for new' housing, and the intensification of the development of the housing rental market, among other measures.

On August 29th, Hengyang City in Hunan Province issued a notice on 'Several Measures for Further Promoting the Stable and Healthy Development of the Real Estate Market (Trial)', proposing to support insurance companies in developing new insurance products for real estate such as constructing and price stabilization insurance, and encouraging developers to purchase insurance, while allowing homebuyers to enjoy insurance benefits.

Looking forward to 'Golden September and Silver October'.

Overall, the current real estate industry is still under downward pressure.

According to the data from the China Index Research Institute, in the period from January to August 2024, the total sales of the top 100 real estate enterprises amounted to 2.7 trillion yuan, a year-on-year decrease of 38.5%, narrowing by 1.6 percentage points compared to the previous month. In August, the monthly sales of the top 100 real estate enterprises decreased by 22.1% year-on-year, a decrease of 2.43% month-on-month.

As we enter September, the real estate market will usher in the traditional sales peak season known as the "golden September and silver October", with various regions expected to launch real estate promotion activities.

Jianghai Securities believes that while new home prices in 100 cities have slightly risen compared to the previous month, second-hand housing prices continue to decline, indicating the continued differentiation in the current real estate market. With the traditional peak season of "golden September and silver October" approaching, real estate enterprises may intensify promotional efforts, coupled with further implementation of policy support, which is expected to enhance market activity.

Looking ahead, with more supportive policies being successively introduced, consumer confidence in home purchases is expected to further stabilize and gradually recover, leading to a potential improvement in the performance of the real estate sector.

Dongguan Securities pointed out that overall, the industry is undergoing a large-scale reshuffle and clearance stage, gradually emerging from the current cycle bottom, entering a new development cycle and new development models, which is promising. This will benefit the overall industry valuation. Outstanding real estate enterprises remaining will be able to seize opportunities to increase market share, enhance performance, and enjoy the chance for valuation reassessment.

Zheshang Securities stated that the stimulating effect of the "May 17 New Policy" on real estate sales in 2024 is gradually weakening, but the downward trend in sales and land investment from January to August has not been broken. There is still downward risk in the real estate sector, and it is highly probable that end-of-year policy reinforcement to stabilize the market may occur. In addition, the low point in the real estate industry index in September is a good time to layout for real estate investments, where policy reinforcement and seasonal fundamentals repair both have the opportunity to drive the valuation recovery of real estate sectors.