Original title: Economic Observation: China’s central bank comprehensively cuts real estate is expected to benefit mainly
China News Agency, Beijing, November 25th. The People’s Bank of China has lowered the RRR for the second time this year. What does it mean for the real estate market?
On the 25th, the People’s Bank of China stated that it decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on December 5, 2022 (excluding financial institutions that have implemented a 5% deposit reserve ratio). The RRR cut released a total of about 500 billion yuan of long-term funds (RMB, the same below).
The real estate market will be one of the key beneficiaries of the loose monetary policy. Wen Bin, chief economist of China Minsheng Bank, pointed out that judging from the deployment of the State Council executive meeting on the 23rd and the 16 financial measures launched by the two departments to support the stable and healthy development of the real estate market (hereinafter referred to as “financial 16 measures”), the epidemic has seriously affected Industries and small, medium and micro enterprises, infrastructure, manufacturing, real estate, equipment renewal, etc. will be important credit support areas.
Since the second half of last year, China’s real estate industry has been in a downturn, and market expectations have weakened. Liu Lijie, a market analyst at the Shell Research Institute, said that recently, the “16 Financial Measures” support policy has been introduced. This RRR cut will provide ammunition for increasing credit support in the housing market, help improve market expectations, and accelerate the bottoming of the property market.
Recently, several regulatory authorities in China have successively released positive signals to provide more financial support for real estate companies and home buyers. Personal housing loan interest rates and down payment ratios have been continuously lowered, 200 billion yuan of “guaranteed housing” special loans have been introduced, the “second arrow” (private enterprise bond financing support tool) has been postponed and expanded, and the regulators have also clearly supported development loans, trust loans, etc. Financing is reasonably extended on the premise of ensuring the security of creditor’s rights.
The implementation of these policies is accelerating. According to statistics from Huatai Securities, from the 23rd to the 24th, a number of representative real estate companies received intentional credit lines from commercial banks, with a total scale of over 1.27 trillion yuan. The “Second Arrow” financing plan has also been implemented frequently. Since November 10, the registered issuance amount of the shelf has reached 93 billion yuan, and the new credit-enhancing bond issuance amount has reached 4.7 billion yuan.
In this context, how does this RRR cut affect the property market? Chen Wenjing, director of market research at the Index Division of the China Index Research Institute, explained that the RRR cut can increase the long-term stable funding sources of financial institutions, enhance the ability of financial institutions to allocate funds, and at the same time, reduce the cost of funds of financial institutions. Transmission through financial institutions can promote the reduction of comprehensive financing costs for the real economy. The release of more capital liquidity by this RRR cut will also be conducive to the landing of real estate-related funds.
Wang Xiaoqiang, chief analyst at the Zhuge Housing Data Research Center, also pointed out that the RRR cut is urgent and necessary, and will play an important role in the real estate sector. RRR cuts can release more liquidity, which also lays the foundation for banks to support reasonable financing for private housing companies. On the other hand, under the background that the restoration of the fundamentals of the real estate market is less than expected, it is expected that the RRR cut will provide greater financial support to the real estate market, which will help the recovery of real estate development investment, funds in place and other industry fundamentals.
In addition to injecting confidence into the property market and releasing more liquidity, Liu Lijie said that after the RRR cut, the possibility of a correction of the LPR (Loan Quoted Rate) with a period of more than 5 years, which is the “anchor” of the mortgage interest rate, will increase, that is, the mortgage interest rate The lower limit is expected to welcome general drop again. At present, the interest rates of the first and second home loans in most cities are at the lower limit of the policy. According to the statistics of the Shell Research Institute, as of November 18, the mainstream interest rates for first-home loans in 18 cities have dropped to “3 prefixes” (less than 4%).
Liu Lijie pointed out that the “Financial 16 Articles” clearly mentioned that “local policies can reasonably determine the lower limit of local individual housing loan down payment and loan interest rate policies on the basis of national policies.” The government has further policy space, such as reducing the down payment for home purchases and relaxing the criteria for identifying first-time homes, which will help release demand for rigid and improved housing.
Looking ahead, Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Provincial Institute of Urban Planning, believes that there are many positive signals for real estate funds in the near future. It is expected that within this year, whether it is guaranteed delivery of properties, reasonable financing by real estate companies, or mortgage loans for residents, the sentiment of bank loans will improve significantly, thereby stabilizing the fundamentals of real estate at both ends of supply and demand, and promoting real estate to build a bottom and stop falling. (Reporter Pang Wuji)
(Editor-in-charge: He Xin)