Will housing prices rise?, First tier cities have fully implemented the policy of "recognizing houses but not loans"

On September 1st, Shanghai and Beijing announced the implementation of the policy of "recognizing houses but not loans" on the same day.

Note that this time, it is not a shameful execution of regions and groups, but a truly comprehensive implementation. The policy text is basically consistent with Guangzhou and Shenzhen, and the intensity exceeds market expectations.

At this point, the policy of "recognizing houses but not loans" to support the improvement of demand has been fully implemented in four first tier cities in China. As a benchmark for the real estate market, first tier cities have seen substantial easing in their housing finance and credit policies, releasing strong policy signals. Experts predict that this will greatly restore market sentiment and expectations, boost market confidence, and the real estate market in core cities is expected to emerge from a downward range.

Why does Beijing and Shanghai follow up simultaneously?

It is not surprising that Guangzhou and Shenzhen took the lead in implementing the policy of "recognizing houses but not loans".

Official data shows that in July, the prices of newly-built commercial housing in Beijing and Shanghai increased by 0.4% and 0.2% respectively, while Guangzhou and Shenzhen decreased by 0.2% and 0.6% respectively. The trend differentiation of first tier cities has been ongoing for a period of time, with "rising in the north and falling in the wide and deep".

However, from the recent market perspective, the real estate markets in Beijing and Shanghai are not without pressure.

According to data from China Index Research Institute, in August, the transaction area of new houses in Beijing decreased by 22.3% month on month and 17.8% year-on-year, while the transaction volume of second-hand houses was 10960 units, an increase of 12.8% month on month and a decrease of 20.2% year-on-year. However, the absolute volume is still less than 15000 units, and market activity is still insufficient; From the perspective of housing prices, although the prices of new houses have slightly increased, the prices of second-hand houses in Beijing have been declining for four consecutive months.

The transaction volume of newly built commercial residential properties in Shanghai has been below 5000 units for two consecutive months, while the transaction volume of second-hand houses has been below the "boom bust line" for four consecutive months.

Li Yujia, Chief Researcher of the Housing Policy Research Center of Guangdong Provincial Urban Planning Institute, believes that the housing market's decline in August exceeded market expectations, and the previously relatively strong first tier cities had the largest decline in transaction volume. Therefore, it is urgent to stabilize expectations as soon as possible during the "golden September and silver October" and year-end sales peak season approaches. Especially, the real estate market in the three major metropolitan areas, including Beijing, Shanghai, Guangzhou, and Shenzhen, accounts for 70% of the sales share of the national new housing market. This is the basic development of the real estate market and also the key to stabilizing the real estate market. This is also an important reason why Shanghai and Beijing have followed up on the policy of "recognizing houses but not loans", and the policy statement is consistent with Guangzhou and Shenzhen.

Zou Linhua, the head of the Housing Big Data Project Team at the Institute of Finance and Strategy of the Chinese Academy of Social Sciences, also stated that since the second quarter, although the real estate market in first tier cities has also experienced a temporary downturn, with sales shrinking and housing prices falling, overall, the real estate market in first tier cities is relatively healthy, and the phenomenon of housing surplus is not prominent.

However, he emphasized that due to the continuous interest rate hikes of the US dollar and the aftermath of multiple rounds of stimulus policies, there has been a significant common decline in second-hand housing prices in various regions in the past three months. The market shock formed by the simultaneous rise and fall is an important inducement for systemic risks in the real estate industry. From a macro perspective, in order to reverse the common decline and underlying systemic risks in various regions, it is necessary to adopt a certain "one size fits all" approach to boost market confidence. He believes that it is necessary for first tier cities to fully implement "house recognition but not loan recognition" and other demand support measures.

Recently, the Chairman of Vanke's Board of Directors, Yu Liang, also admitted that based on indicators such as the newly started residential area, the current real estate market has exceeded its decline. The sluggish real estate sales have been ongoing for a period of time, and market sentiment has been affected to some extent, making it easy to overreact.

The real estate market is expected to emerge from a downward trend

Recently, multiple policies have been fully implemented. The industry expects a policy synergy to drive the real estate market out of the downward range.

On August 31st, the People's Bank of China and two other departments issued a document stating that the minimum down payment ratio policy for commercial personal housing loans for first and second homes will be unified to not less than 20% and 30%, respectively; Adjust the lower limit of the interest rate policy for the second housing to no less than the market quoted interest rate for the corresponding term loan plus 20 basis points.

According to the analysis of Beike Research Institute, 20% and 30% of down payments have reached the lowest down payment level in the history of Chinese real estate. Especially in big cities, the down payment ratio has significant downward potential, and the threshold for purchasing a house will be lowered, resulting in a significant increase in purchasing power. Homebuyers who were previously hesitant due to down payment restrictions or unclear policies will concentrate on entering the market. The increase in market transaction volume will drive an improvement in price expectations, and housing prices will gradually stabilize. The market is expected to emerge from a downward trend and return to a healthy and healthy development.

How strong is the policy after overlapping? Chen Wenjing, Director of Market Research at Zhongzhi Research Institute, pointed out that for households in Beijing who have no housing or loan records, the down payment ratio will be reduced from 60% -80% to 35% -40%. Calculated based on a total price of 4 million yuan, the down payment ratio for ordinary residential properties will be reduced by 1 million yuan, and the down payment ratio for non ordinary residential properties will be reduced by 1.6 million yuan. The mortgage interest rate will decrease from 5.25% to 4.75%, a decrease of 50 basis points. Taking a loan of 3 million yuan as an example, calculated based on 25 years of equal principal and interest, the interest will decrease by 262100 yuan, and the threshold and cost of purchasing a house will significantly decrease.

Beike Research Institute pointed out that based on historical experience, the transaction volume of second-hand houses in the three months after relaxing loan restrictions has increased by 20-30% compared to before the policy. This time, two days after the implementation of the "house recognition but not loan recognition" policy in Guangzhou and Shenzhen on August 30th, the daily average transaction volume of second-hand houses in Guangzhou has increased by 25% compared to last week's level, while in Shenzhen it has increased by 70%, and the number of customers showing has also increased rapidly.

According to China Index monitoring, except for first tier cities, cities such as Wuhan, Zhongshan, Huizhou, and Dongguan have clearly issued documents to implement the policy of "recognizing a house but not a loan" for the first home. In the short term, other second tier and third - and fourth tier cities will fully follow up. The warm policy winds are blowing frequently, and the real estate market in core cities will usher in an upward trend. The "golden nine silver ten" market is expected.

Will housing prices soar?

Li Yujia believes that although policies have fully returned to normal, it will not bring about a new round of rebound in the real estate market, mainly because the fundamentals of the real estate market have changed. First of all, during the last round of property market recovery, residents were very optimistic about housing prices. Driven by new economies such as real estate, financial innovation, mass entrepreneurship and the Internet, residents were also very optimistic about income and employment prospects. Optimistic expectations for housing prices and income and employment are the key factors driving the prosperity of the real estate market. Now, these two optimism have weakened a lot, and the foundation for the resurgence of prosperity in the real estate market no longer exists.

In addition, macro fundamentals and financial environment have changed beyond what they used to be. Li Yujia believes that now, whether it is housing prices, household leverage, housing demand space, etc., there have been significant changes, which is a new situation where the so-called supply and demand relationship has undergone significant changes. From this perspective, the purpose of this real estate policy adjustment is to prevent risks and maintain stability.