On the last trading day before the National Day on September 30, Hong Kong A-share real estate stocks soared collectively at the opening bell. As of the drafting time, Hong Kong stocks $R&F PROPERTIES (02777.HK)$rose more than 20%,$SUNAC (01918.HK)$rose by nearly 19%.$CIFI HOLD GP (00884.HK)$,$LOGAN GROUP (03380.HK)$,$CHINA JINMAO (00817.HK)$$CHINA VANKE (02202.HK)$All averaged gains exceeded 10%.

A-share Shenzhen SDG Service 20CM hit the limit up, with Gemdale Corporation, Shenzhen Overseas Chinese Town A, Seazen Holdings, Greenland Holdings Corporation and more than 10 other stocks all hitting the limit up.

In the news, on the evening of September 29, the People's Bank of China and the China Banking and Insurance Regulatory Commission jointly issued four financial support policies for the real estate sector, officially announcing the optimization of housing loan interest rate pricing, down payment ratio, indemnificatory apartment refinancing, and certain real estate financial policy deadlines mentioned at the meeting on September 24.

At the same time, first-tier cities successively provided support, with Guangzhou completely lifting purchase restrictions, and Shanghai and Shenzhen easing purchase restrictions.

The intensively favorable news for the real estate sector is coming in succession.

On the evening of September 29, the People's Bank of China, together with the China Banking and Insurance Regulatory Commission, issued four financial policies to support the real estate sector, including improving the pricing mechanism for commercial individual housing loans, optimizing the minimum down payment ratio for individual housing loans, optimizing re-loans for indemnificatory housing, and extending the deadlines for some real estate financial policies. Specifically:

Improving the pricing mechanism for commercial individual housing loans: (1) Allowing adjustments to the spread of mortgage rates based on the LPR. Both borrowers and lenders can adjust the spread through negotiation to more accurately reflect changes in market supply and demand, borrower risk premiums, and other factors. (2) Removing the restriction that the shortest period for repricing mortgage rates is one year. Starting from November 1, 2024, new contracts for floating-rate mortgage loans will align with the repricing periods of other floating-rate loans, excluding mortgages, and the repricing period can be independently negotiated by both parties. Eligible existing mortgage borrowers negotiating adjustments to the mortgage rate spread with commercial banks can also adjust the repricing period.
Optimizing the minimum down payment ratio for individual housing loans: (1) Unifying the minimum down payment ratio for first and second homes to 15%. Commercial individual housing loans will no longer differentiate between first and second homes, and the minimum down payment ratio will be unified at no less than 15%. (2) Emphasizing the principle of varying policies by city. In addition to the national unified minimum down payment ratio, local authorities will autonomously determine whether to set differentiated minimum down payment ratio policies for different cities based on the principle of varying policies by city and establish the minimum lower limit of the minimum down payment ratio for different cities.
Increasing the proportion of re-loans for indemnificatory housing: In order to support local state-owned enterprises in reasonably priced acquisitions of completed but unsold commercial housing for use as indemnificatory housing, and to enhance market-oriented incentives for financial institutions and the acquirers, the People's Bank of China has increased the proportion of re-loans issued to financial institutions from 60% of the loan principal to 100% for loans meeting the requirements.
Extending the deadlines for some real estate financial policies: To meet the reasonable financing needs of the real estate industry, the deadlines for the '16 Financial Measures' and operational property loan policies are extended until the end of 2026.

In addition, a proposal for a market interest rate pricing self-discipline mechanism was issued, with commercial banks, in principle, required to conduct bulk adjustments to eligible existing home loans by October 31, 2024.

Subsequently, the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank announced that they will resolutely implement relevant requirements and lawfully and orderly promote the reduction of existing commercial individual housing loan rates.

On the same evening, major first-tier cities successively took action, with Guangzhou fully lifting purchase restrictions, and Shanghai and Shenzhen relaxing purchase restrictions.

On the evening of September 29, the Shanghai Municipal Commission of Housing and Urban-Rural Development issued 7 new real estate policies, including adjusting purchase restrictions, reducing down payments, and lowering the tax costs of housing transactions. On the evening of September 29, the General Office of the Guangzhou Municipal People's Government issued a notice on adjusting the measures for the stable and healthy development of the city's real estate market, explicitly canceling all purchase restrictions for resident families buying houses in the city, residents and singles will no longer be subject to qualification review or restrictions on the number of housing units purchased within the city. On the evening of September 29, Shenzhen issued a notice on further optimizing policies for the stable and healthy development of the real estate market. It mentioned that the minimum down payment ratio for first-time commercial personal housing loans in Shenzhen is adjusted to 15%, and for second housing loans, it is adjusted to 20%.

Institutions: Real estate fundamentals may be approaching a turning point.

It is worth noting that the unexpectedly strong introduction of major real estate policies last week reflects the central government's firm determination to promote the stabilization of the real estate market.

On September 24, the central bank announced a reduction in existing home loan interest rates and unified the minimum down payment ratio for home loans; On September 26, the Political Bureau of the CPC Central Committee held a meeting emphasizing the need to stabilize the real estate market, strictly control the increase in new commercial housing, optimize existing stock, improve quality, increase loans for projects on the "white list", support the revitalization of idle land resources. To address public concerns, adjust housing purchase restrictions, lower existing home loan interest rates, promptly improve land, financial, and tax policies, and promote the establishment of a new model for real estate development.

With the continuous introduction of favorable real estate policies recently, there have been positive changes in real estate data: transaction volumes of new and second-hand homes have shown signs of recovery, and the decline in house prices has narrowed.

According to research by Northeast Securities, the transaction area of new homes in the top 30 cities increased last week, sales areas in various tiers of cities have also rebounded, with third-tier cities reaching levels close to the same period in 2021; second-hand home sales have also increased in volume and price, with transaction areas at seasonal highs, and the price decline rate for second-hand homes has narrowed, with first-tier cities showing an increase in listing price index month-on-month.

Zhongtai Securities believes that the fundamentals of the real estate sector are approaching the bottom, and with continued policy support, valuation of the sector is expected to recover.

Tianfeng Securities believes that the Political Bureau meeting stated the intention to "promote the stabilization of the real estate industry", indicating that a turning point in fundamentals may be near, with continued expectations for incremental policies. In terms of trading, the market's "consensus on the bottom" is strengthening, and the logic of "short-term policy game + medium-to-long-term valuation recovery" is more smooth, providing significant upside potential for cyclical real estate stocks in the future.

In terms of allocation direction, the institution suggests prioritizing: 1. Non-state-owned enterprises benefiting from debt-to-equity swaps, policy relief, and improved demand under multiple logical dilemmas; 2. Leading real estate companies with investment and product improvement advantages have unique cycle resilience; 3. Regional enterprises have differentiation in urban fundamentals and logic of market share enhancement; 4. Second-hand intermediaries benefit from the increase in the vibrancy of stock market transactions. Among them, undervalued high-quality non-state-owned enterprises and local enterprises benefit from the elastic space or greater flexibility of policies such as financing and inventory reduction.

Editor/ping