The long-awaited interest rate cut for existing home loans has finally been implemented.

Affected by this, A-share real estate and property stocks have strengthened. As of the time of publication, Yang Guang Co., Ltd., Jilin Yatai, and Shanghai Join Buy have hit the limit up, cccg real estate corporation has risen by more than 4%, Langold Real Estate, Risesun Real Estate Development have risen by more than 2%, New China Land, 5i5j Holding Group have risen by more than 1%.

Hong Kong real estate stocks have surged, with the sector seeing five consecutive trading days of gains.

On the individual stock level, R&F Properties rose by more than 17%, Sunac, Shimao Group rose by more than 9%, Agile Group, Cifi Hold Gp rose by more than 6%, Longfor Group, China Res Land, Greentown China rose by more than 4%.

All four arrows are released.

Today, the People's Bank of China announced a series of measures to support the real estate sector and real estate enterprises at a press conference.

First, lower the interest rates on existing home loans and unify the minimum down payment ratio for home loans. Guide commercial banks to reduce the interest rates on existing home loans to be close to the rates for new home loans, with an average expected decrease of around 0.5 percentage points. At the same time, unify the minimum down payment ratio for first homes and second homes to 15%.

Second, the central bank will support the acquisition of existing land by real estate companies. Building on the use of some local government special bonds for land reserves, exploration will be done to allow policy banks and commercial banks to provide loans to support conditionally market-oriented acquisitions of land by enterprises, reviving existing land use and alleviating funding pressures on real estate companies. When necessary, the People's Bank of China can provide policy support.

Third, the central bank will optimize the policy for refinancing loans for affordable housing. The proportion of People's Bank of China funds' support in the previously established 300 billion yuan refinancing for affordable housing will be increased from 60% to 100%, enhancing market incentives for banks and acquiring entities.

Fourth, extend the term of two real estate financial policy documents. Previously, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued 16 financial measures and two operational property loan policies. The validity period of these two policies will be extended from December 31, 2024, to December 31, 2026.

Among the above policies, the market is particularly concerned about the reduction in existing home loan interest rates.

Since the beginning of this year, the central bank has twice reduced the 5-year LPR to 3.85% in February and July, with a cumulative decrease of 35 basis points.

According to Tianfeng Securities' previous calculations, the average interest rate on existing home loans is approximately 4.21%, while the average interest rate on new home loans in the second quarter of this year is 3.45%, resulting in a 76 basis point spread between the two. Excluding the 35 basis points reduction in the 5-year LPR earlier this year, the maximum potential decrease in existing home loan interest rates is 40 basis points.

What is the impact on the capital markets?

Currently, the real estate industry is still in the bottoming phase. This time, the central bank's significant move to boost market confidence is expected to stabilize and revive the industry.

From past experience, there are two ways to adjust the interest rates of existing home loans: one is to directly change the interest rate level stipulated in the contract, and the other is to replace existing home loans with new loans.

In terms of investment, Tianfeng Securities believes that the reduction in mortgage interest rates will also increase the attractiveness of long-term bonds to banks. In the short term, lowering existing home loan rates is a clear positive for the bond market. It is neutral for the stock market in the short term, and may also bring the possibility of earlier improvements in the medium to long term.

Opensource Securities believes that against the background of continuous pressure to lower new mortgage rates and the continuous decline in sales data of commercial housing, the introduction of policies to adjust existing housing loan rates will help stabilize the housing market. It continues to be bullish on high-intensity investments, regions with superior layouts, and market-oriented credit-strong real estate companies.

Recommended investment targets: 1) Poly Developments, China Merchants Shekou, China Overseas Development, Xiamen C&D Inc., Yuexiu Property, and other high-quality central state-owned enterprises; 2) China Vanke Co., Ltd., Greentown China, Hangzhou Binjiang Real Estate Group, Seazen Holdings, and other financially stable private and mixed-ownership enterprises.

However, Zhongjin points out that the pressure of high inventory on housing prices for the next 1-3 years still exists. The historical burden on the business side of enterprises still needs to be digested, and the cycle of destocking and deleveraging will take time. With limited room for improvement in profitability and net assets, the probability of long-term trend investment opportunities is small; however, potential policy adjustments in the medium to short term may still bring certain trading opportunities.