Zhongtai Securities released research reports stating that recently, the high-frequency data of real estate has been continuously decreasing, even weakening compared to August, a peak season. The industry fundamentals are hard to bottom out in the short term, but looking ahead to the fourth quarter, there is a high probability that bullish policies related to real estate will continue to be introduced. Zhongtai Securities remains bullish on the performance of the real estate sector in the fourth quarter.
According to the Financial News App, Zhongtai Securities released research reports stating that recently, the high-frequency data of real estate has been continuously decreasing, even weakening compared to August, a peak season. The industry fundamentals are hard to bottom out in the short term, but looking ahead to the fourth quarter, there is a high probability that bullish policies related to real estate will continue to be introduced. Zhongtai Securities remains bullish on the performance of the real estate sector in the fourth quarter.
In the real estate sector, Zhongtai Securities recommends focusing on high-quality national central enterprises such as Beijing Urban Construction Investment & Development (600266.SH), Shanghai Chengtou Holding (600649.SH), Zhuhai Huafa Properties (600325.SH), in the property sector, Zhongtai Securities continues to recommend China Resources Mixc Life (01209), China Overseas Property Ppt (02669), and Poly Property Services (06049) and other top-quality property companies.
Zhongtai Securities' main points are as follows:
Event: On September 24, the State Council Information Office held a press conference, introducing relevant information on financial support for high-quality economic development by the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission. Regarding real estate: 1. Reserve requirement ratio cut: cut by 0.5 percentage points; 2. Interest rate cut: 7-day reverse repurchase operation rate lowered by 20 basis points to 1.5%; 3. Reduce the mortgage interest rate: the average reduction is expected to be 0.5 percentage points; 4. Reduce the down payment ratio for the second home: from the current 25% to 15%; 5. Extend the financial support policies for the 16 measures and commercial property loans to the end of 2026; 6. The central bank's re-lending for affordable housing increases the proportion of commercial bank loans supported from the original 60% to 100%; 7. Support the acquisition of existing land by real estate companies.
With the implementation of reserve requirement ratio and interest rate cuts, the new house mortgage rates are expected to decline: The central bank stated that it would 'reduce the deposit reserve ratio by 0.5 percentage points in the near future... the 7-day reverse repurchase operation rate will be lowered by 0.2 percentage points, from the current 1.7% to 1.5%... It is expected that the loan market quote rate (LPR) will also decrease by 0.2 to 0.25 percentage points. Due to the linking of housing loans with LPR, after the interest rate cut, the new mortgage rates are expected to decrease accordingly, which may reduce the long-term mortgage cost pressure on residents.
Lowering the existing mortgage rate by about 0.5 percentage points stabilizes the prepayment behavior while stimulating consumption: In recent years, the interest rates on newly issued mortgage loans have declined significantly, gradually creating a larger interest rate differential compared to previously issued higher-interest existing mortgage loans. This has brought about a wait-and-see attitude among potential homebuyers while stimulating existing customers to repay their loans early. With this adjustment of existing mortgage rates closer to new house mortgage rates, it is beneficial for reducing borrowers' interest expenses, promoting consumption and investment, with an expected annual reduction of around 150 billion in residents' interest expenses, while also reducing early repayment behavior. In addition, the reduction of long-term housing holding costs also helps to lower the listing of existing homes, optimizing the current supply and demand situation in the market.
The down payment ratio for second-hand homes has been reduced from 25% to 15%, meeting the needs of diversity: The central bank pointed out that on a national level, individual housing commercial loans will no longer differentiate between first and second homes, with a unified minimum down payment ratio of 15%. Treating first and second homes equally further reduces the threshold for improvement-demand customers to buy houses, creating conditions for customers willing to leverage and helping meet the needs of improvement-demand customers. However, considering that customers willing to take out loans with a 15% down payment and 85% financing are relatively few in reality (higher leverage corresponds to higher monthly payments), the marginal improvement in real estate sales brought about by the customer base covered by this policy may be limited.
Extend support policies for the '16 Financial Measures' and operational property loans to the end of 2026: The '16 Financial Measures' and operational property loan policies have played a positive role in promoting the stable and healthy development of the real estate market and mitigating risks in the real estate market. The purpose of these two policies is to control credit risks in the real estate industry, provide reasonable support to real estate companies operating normally. As the real estate industry has not shown a clear improvement trend, the extension of these two policies by the central bank and the China Banking and Insurance Regulatory Commission from the end of 2024 to the end of 2026 is in line with market expectations.
Optimize the land acquisition and storage policies: Increase the proportion of supportive funds, may acquire land: The central bank further optimizes the land acquisition and storage policy: 1) For the 300 billion yuan supportable housing re-loans announced by the central bank on May 17, 2024, the central bank's contribution ratio has been increased from 60% to 100%; 2) Previously, the acquisition and storage scope was limited to existing housing, but now it is expanded to include land. In addition, based on using some local government special bonds for land reserves, the policy is being studied to allow policy banks and commercial banks to provide loans to support conditionally enterprise market acquisition of land from real estate companies, which will help invigorate existing land use, alleviate the financial pressure on real estate companies.
Investment recommendations: Recently, the high-frequency data in the real estate sector has continued to decline. As the peak season weakens compared to August, the short-term industry fundamentals are difficult to bottom out. However, looking ahead to the fourth quarter, there is a high probability that positive real estate-related policies will continue to be introduced. We remain bullish on the performance of the real estate sector in the fourth quarter and suggest focusing on quality national and central enterprise targets in the real estate sector of Beijing urban construction investment & development, Shanghai Chengtou Holding, Zhuhai Huafa Properties, China Resources MixC, China OVS PPT, China Merchants Property Operation & Service, and Greentown Ser. For the property sector, we continue to recommend China Resources MixC, China OVS PPT, China Merchants Property Operation & Service, Greentown Ser, and other high-quality leading property companies.
Risk warning: Policy advancement falls short of expectations, and industry fundamentals continue to decline.
