Financial "stimulus policy package" stabilizes real estate market; can home-buying demand be further released? Market participants say the property market is expected to continue its recovery in May

On May 7, at a press conference held by the State Council Information Office, Li Yunze, Director of the National Financial Regulatory Administration, stated that the authority would expedite the introduction of a series of financing systems tailored to the new model of real estate development, aiming to sustain and consolidate the stability of the real estate market.

Industry insiders pointed out that currently, the most closely watched aspect is the implementation of standardized housing projects, which implies that there is potential for increased policy support in development loans and mortgage loans in the future. "It is anticipated that, on one hand, there will be an increase in financial support for enterprises, boosting the supply of high-grade housing; on the other hand, financial incentives aligned with the demand for high-grade housing are also expected to be gradually implemented. Both supply and demand sides will continue to work together to facilitate the release of demand for improved housing."

Additionally, at the conference, the People's Bank of China proposed reducing the interest rate on personal housing provident fund loans by 0.25 percentage points. It is estimated that this will save residents over 20 billion yuan in annual interest expenses on provident fund loans, which is conducive to supporting the rigid housing demand of resident families and promoting the stabilization of the real estate market. Industry insiders told a Caixin reporter that this move widens the gap between provident fund loan interest rates and commercial loan interest rates. In the future, the interest rates on existing provident fund loans are also expected to be lowered.

Expedite the introduction of new real estate financing regulations; approved loan amounts under the "white list" increase to 6.7 trillion yuan.

The April 25 meeting of the Political Bureau of the CPC Central Committee once again put forward clear requirements for stabilizing the housing and stock markets. At today's press conference, the National Financial Regulatory Administration stated that it would resolutely implement the deployment requirements of the CPC Central Committee and the State Council, collaborate to deliver a "stimulus policy package {{referring specifically to the economic stimulus policies of the People's Bank of China}}", and actively carry out relevant work. It will expedite the introduction of a series of financing systems tailored to the new model of real estate development, aiming to sustain and consolidate the stability of the real estate market.

In terms of specific measures, Li Yunze pointed out that the authority would accelerate the improvement of a series of financing systems tailored to the new model of real estate development, including loan management methods for real estate development, personal housing, and urban renewal. It would guide financial institutions to continue maintaining stable real estate financing, effectively meeting rigid and improved housing demands, and strengthening financial support for high-grade housing.

"In the new model, the most closely watched aspect is the implementation of standardized housing projects. This implies that there will be better financial support in these areas in the future to better facilitate the release of housing demand, such as policy support in development loans and mortgage loans," said Yan Yuejin, Deputy President of the E-House China R&D Institute, to a Caixin reporter.

The China Index Academy also predicts that more supporting policies will be continuously implemented in the future, with loan support for enterprises and individuals being continuously increased.Meanwhile, this time it was also emphasized to "strengthen the funding supply for high-grade housing." The 4.25 Political Bureau meeting clearly stated the need to "increase the supply of high-grade housing." This time, the emphasis was on strengthening financial support. It is expected that, on the one hand, financial support for enterprises will be increased to boost the supply of high-grade housing; on the other hand, financial preferential policies that match the demand for high-grade housing are also expected to be gradually implemented. Both the supply and demand sides will continue to work together to promote the release of improved housing demand.

"The new model itself also needs to actively address the past debt issues of real estate enterprises. To promote the transformation of real estate enterprises, it is necessary to actively resolve debts. Through a series of supporting financing policies, it will help various real estate enterprises accelerate debt resolution and digest existing assets this year, as well as contribute to the development of a new round of real estate enterprises. Therefore, whether it is the home-buying market or the capital market, it is important to understand the function of such supporting financing systems in repairing the fundamentals of real estate enterprises," said Yan Yuejin.

Li Yunze stated that solid efforts should be made to expand and enhance the efficiency of the urban real estate financing coordination mechanism. Currently, the "white list" loans approved by commercial banks have increased to RMB 6.7 trillion, supporting the construction and delivery of over 16 million residential units, effectively safeguarding the legitimate rights and interests of home buyers and providing important support for the real estate market to stabilize and recover.

The positive changes in the real estate market are also reflected in credit data. In the first quarter of this year, the balance of real estate loans increased by more than RMB 750 billion, with new personal housing loans achieving the largest single-quarter increase since 2022, and housing rental loans increasing by 28% YoY.

The real estate market in many parts of the country has continued the warming trend from the first quarter, especially in first- and second-tier cities, where the real estate market continues to maintain a positive momentum.

"In key cities, the transaction volumes of new and second-hand homes have shown YoY growth for two consecutive quarters. Although the growth rate in the first quarter of this year has declined compared to the growth rate in the fourth quarter of last year, the trend of stabilizing and recovering is still very evident," Li Yujia, chief researcher at the Guangdong Provincial Housing Policy Research Center, told reporters from Cailian Press. From the perspective of housing market transactions in April and during the Labour Day holiday, despite the good sales performance of high-end improved housing projects in hotspot cities...

According to monitoring by China Index Academy, in May, several high-quality projects are still expected to enter the market in key cities such as Beijing, Shanghai, Hangzhou, Nanjing, and Chengdu, mainly focusing on mid- to high-end improved products. The implementation of favorable policies combined with the entry of high-grade projects into the market is expected to better promote the release of improved and replacement demand. It is expected that the real estate market will continue to recover in May.

Interest savings for residents exceed RMB 20 billion annually due to the reduction in housing provident fund interest rates

At a press conference, Pan Gongsheng, Governor of the People's Bank of China, pointed out that the interest rate on personal housing provident fund loans will be reduced by 0.25 percentage points.Specifically, the interest rate for first-home loans with a term of over five years has been reduced from 2.85% to 2.6%, with interest rates for other terms adjusted accordingly.

"It is estimated that this will save residents over 20 billion yuan in annual interest expenses on housing provident fund loans, which is conducive to supporting the rigid housing demand of resident families and promoting the stabilization of the real estate market," Pan Gongsheng pointed out.

The market believes that this measure will better leverage the people-friendly function of housing provident fund loans, while also widening the gap between housing provident fund loan interest rates and commercial loan interest rates.

Regarding the background of the policy's introduction, Li Yujia stated that the earlier decline in residents' enthusiasm for buying homes led to an increase in the housing provident fund pool, creating conditions for reducing interest rates and improving utilization efficiency. "In addition, previously, the commercial loan interest rate was 3%, while the housing provident fund loan interest rate was 2.85%, with a very small gap between the two. Coupled with the limit on housing provident fund loan amounts, this led to a decrease in enthusiasm for housing provident fund loans," he said.

"This time, commercial loan interest rates have not been directly reduced, thereby widening the gap between housing provident fund loan interest rates and commercial loan interest rates. Currently, the gap stands at 40 basis points. Coupled with the increase in housing provident fund loan amounts in various regions, this will help improve the utilization efficiency of housing provident fund loans, better leverage their cost-reducing effects, and support both rigid demand and improvement demand," Li Yujia stated.

According to estimates, if a homebuyer has a housing provident fund loan with a principal amount of 1 million yuan, a 30-year term, and equal principal and interest payments, the monthly payment before the policy was 4,136 yuan, while after the reduction in the housing provident fund loan interest rate, the monthly payment becomes 4,003 yuan, a decrease of 133 yuan. The total repayment amount has changed from 1.49 million yuan to 1.44 million yuan, a direct reduction of 50,000 yuan.

Yan Yuejin pointed out that this year, there has been a continuous emphasis on interest rate cuts for housing provident fund policies to better leverage the people-friendly and consumption-supporting functions of housing provident fund loans. "By cutting interest rates, the issue of the interest rate spread between previous housing provident fund loans and commercial loans has been reduced, ensuring that the housing provident fund policy can exert better effects," he said.

In addition, regarding the interest rates for existing housing provident fund loans, Yan Yuejin pointed out that based on past practices in financial policy operations, this policy mainly refers to the interest rates for new housing provident fund loans. However, he expects that subsequent adjustments will also be made to reduce the interest rates for existing housing provident fund loans in accordance with existing policies.