A Chinese flag is seen in the Lujiazui Financial District in Pudong, Shanghai, China, on September 18, 2023.
Raul Ariano | Bloomberg | Getty Images
Chinese property stocks rose on Tuesday after the top financial regulator vowed to implement a series of monetary easing measures to provide some relief to millions of households and promote a recovery in the real estate market.
At a high-level press conference on Tuesday morning, Pan Gongsheng, governor of the People’s Bank of China, announced that Beijing will reduce the interest rate on individual existing housing loans by an average of 0.5 percentage points, and the down payment ratio for second homes will be reduced from 25% to 15%.
This is the first time that down payment levels for first and second homes have been unified, and the People’s Bank of China predicts that lower interest rates will reduce households’ mortgage interest payments by an average of 150 billion yuan ($21.25 billion) per year.
Shortly after the news was announced, the Hang Seng Mainland Real Estate Index surged 5% when the Hong Kong stock market opened.
Hong Kong-listed real estate developer stocks such as China Resources Land, Longfor Group Holdings and China Overseas Development It is one of the stocks with the largest increase in the Hang Seng Index, with increases of 4.49%, 4.57% and 5.41% respectively.
Chinese policymakers have been stepping up support to ease the financial burden on households and boost the struggling property sector.
Previous measures had little effect in stimulating economic recovery, with real estate-related investment falling by more than 10% in the first eight months of this year compared with the same period last year.
Pan told a press conference that the central bank will also guide commercial banks to improve the mortgage loan pricing mechanism and announced that China will reduce bank cash reserves, known as deposit reserve ratios.
William Wu, an analyst at Daiwa Capital Markets, said the impact of the new measures is likely to be limited because “rate cuts on existing loans will not stimulate demand for new homes and may slow the pace of the People’s Bank of China to further reduce prime loan rates,” according to CNBC Chinese translator, said in an email.
Bruce Peng, chief economist and head of research for Greater China at investment management firm Jones Lang LaSalle, predicted it would still take some time for the real estate market to bottom out.
“It is necessary and urgent to roll out support measures in all aspects as soon as possible, but authorities also need to provide effective and efficient support to developers to promote real estate investment and construction activities,” Pang said.
Bloomberg A report last month quoted people familiar with the matter as saying that China was considering a plan that would allow homeowners to renegotiate terms with their current lenders by January next year. Homeowners will be allowed to refinance with different banks for the first time in years, the outlet reported.
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