China's Ministry of Housing and Urban-Rural Development, Ministry of Finance, Ministry of Natural Resources, People's Bank of China, and the China Banking and Insurance Regulatory Commission attended a press conference on October 17th to introduce relevant information on promoting the stable and healthy development of the real estate market.

The Ministry of Housing and Urban-Rural Development stated that it will work together with relevant departments to guide local authorities to act quickly, implement existing policies, introduce new policies, and use a combination of measures. Of particular note in the combination of measures is the 'two increases' policy, which aims to add 1 million units for transforming old urban areas and dilapidated houses through methods like monetized resettlement, with financing methods including local issuance of special bonds. By the end of the year, the credit scale of 'white-list' projects will be increased to 4 trillion, and all qualified real estate projects will be sought to be included in the 'white list', whereby banks will 'lend as much as possible' to projects on the list with funds disbursed as early as possible.

However, despite the positive policies, the real estate sector closed lower, leaving investors questioning why. How do institutional investors view the future trends of the real estate sector? What are the market's concerns regarding the positive policies? Several public funds provide frontline insights.

Why did the real estate sector experience a decline?

On October 17th, the market lost the 3200-point mark, with a downturn throughout the day. Looking at the industry, real estate stocks collectively dropped significantly, with Shenzhen SDG Service falling by over 10%, and Gemdale Corporation hitting the limit down. Within the market stocks ETFs, the real estate ETF, building materials ETF, and infrastructure ETF sectors led the declines due to adjustments in real estate stocks.

Investors are puzzled by why the real estate sector did not correspondingly soar after the specialized meeting convened by the Ministry of Housing and Urban-Rural Development and other departments on real estate.

Industry experts find the market's performance not difficult to understand. Firstly, under a series of bullish policies, the real estate sector had accumulated substantial gains in the previous period. With the arrival of these positive developments, many funds began to take profits.

Using china vanke co.,ltd. as an example, from September 11th to October 16th, the range of china vanke co.,ltd. A increased by nearly 59%, and profit-taking funds have been reflected by the 16th. The real estate index also increased by 41.1% in the same period, making profit-taking a choice for many block orders.

Secondly, in terms of policies, institutions believe that the market reaction tends to be neutral.

The bullish sentiment stems from the possibility of launching urban village and old housing renovations, providing looser policies for the real estate market. On the evening of the 17th, the shanghai Housing Provident Fund Management Committee issued a notice adjusting the policy for individual housing loans under the housing provident fund. For those identified as second homes for improvement, the minimum down payment ratio has been adjusted to 25%. This adjustment further optimizes the housing provident fund policy following shanghai's relaxation of property purchase restrictions and reduction of down payment ratios for commercial loans.

At the same time, some institutions point out that despite signs of market recovery, challenges remain, such as overcoming difficulties in house delivery, land reserves, and acquisition of existing houses.

Public attention on the 'two increases'

The precise and powerful combination of real estate policies effectively addresses market concerns. Public funds generally pay more attention to the 'two increases' mentioned in this press conference.

In the view of public funds, by adding 1 million sets of urban village renovations and dilapidated house reconstructions through monetized housing methods. The amount of white-listed loans is increased to 4 trillion, striving to include all projects in the white list. The addition of 1 million sets this time is mainly aimed at projects with mature conditions that can be advanced with intensified policy efforts. It mainly adopts the method of monetary resettlement, which will be more conducive for the masses to choose suitable ways according to their wishes. The increase in white-listed loan amounts helps maintain the stable cash flow of real estate companies, promoting the long-term healthy development of the real estate market. At the same time, the precise and effective coordination of other complementary policies will promote the stabilization of the real estate market.

China Europe Fund pointed out that this press conference further reflects that the core change of this policy is to maintain asset prices. In the first half of this year, the main logic of real estate policy shifted to the demand side, but at that time, there was no focus on maintaining asset prices and no target for asset prices. Since late September, the policy has mainly emphasized maintaining asset prices and has clearly set targets for maintaining asset prices, including equity prices (creating convenient tools for securities market swaps and share buyback and holding reborrowing) and property prices (requiring real estate to stabilize after the decline). The coordinated cooperation of multiple ministries such as the central bank, the ministry of finance, the ministry of housing and urban-rural development, and the ministry of natural resources also indicates that the government is beginning to focus on repairing residents' balance sheets.

The relevant departments coordinate a package of policy measures, with both supply and demand of special bonds making joint efforts, fiscal support policies are expected to follow suit, the performance of the real estate sector in the fourth quarter is worth looking forward to. China Europe Fund stated that in the next step, companies with solid fundamentals and strong logic will gradually demonstrate their advantages, overall, there are still structural opportunities in the market at the trillion-dollar transaction level.

Boshin Fund stated that the incremental information of this meeting is mainly reflected in the "two increases." The two measures provide specific policy information to resolve existing issues and can be beneficial to winning the battle of property transaction and effectively alleviate concerns of future homebuyers about property completion. Since the end of September, the national real estate market, especially the second-hand housing market in representative cities, has shown improvement in transactions, further reducing the cost of homebuying. The subsequent completion of properties, easing of concerns about real estate enterprises' credit, will be conducive to further boosting the new housing market. The current stable real estate policy direction is clear, and the measures hit the nail on the head. As policies gradually take effect, in the medium term, it will directly benefit the real estate and related financial and industrial chains' performance and further bolster overall economic confidence to benefit China's overall assets.

Xingyin Fund also stated that various departments have introduced a policy combination to firmly implement the policy goal of stabilizing the real estate market and stopping the decline. The "two increases" deserve sufficient market attention. The unexpectedly positive aspect of this meeting is the use of monetary settlement methods, which is beneficial for reducing the existing inventory of commercial housing, allowing residents to choose houses according to their own preferences, reducing transitional periods. The increased efforts in the "white list" are beneficial for alleviating the tight flow of capital for real estate enterprises caused by slowing sales and dealing with issues related to ongoing projects that are difficult to deliver on time, promoting the stable and healthy development of the real estate market.

Caitong Fund pointed out that recent important meetings have made statements regarding real estate, such as coordinating policies to support the real estate market, resolving local debt risks, increasing fiscal spending, and optimizing tax policies, all of which are conducive to stabilizing the real estate market. In particular, the Ministry of Housing and Urban-Rural Development meeting and fiscal debt monetization policy jointly demonstrate the country's comprehensive strategies in stabilizing the real estate market, resolving local debt risks, and safeguarding people's livelihoods, aiming to promote stable and healthy economic development through multifaceted policy support.