Key investment points:
In the past 14 years, China has had two rounds of stimulus in the downward cycle of real estate. This paper analyzes the transmission path and time from loose policy to stable market.
20082009: the down payment ratio and loan interest rate were reduced nationwide, and the sales growth rate was corrected after five months
The global financial crisis spread in 2008. On October 27, 2008, the central bank issued a new deal, reducing the lower limit of loan interest rate to 0.7 times and the down payment ratio to 20%. In December 2008, the State Council issued several opinions on promoting the healthy development of the real estate market to encourage the consumption of ordinary commercial housing.
The growth rate of commercial housing sales area became positive five months later. In August 2008, the growth rate of national commercial housing sales area once dropped to – 35.7%. After the introduction of the policy in October, the sales growth rate gradually picked up. From November 2008 to March 2009, the growth rate of national commercial housing sales area was – 32.9% (November), – 2.2% (December), – 0.3% (February) and 16.4% (March) respectively.
20142016: four wave combination boxing, with sales growth returning to positive after 6 months
Taking September 30, 2014 as the time node, the national commercial housing sales area continued to be negative year-on-year from February 2014 to March 2015. In April 2015, after six months of comprehensive easing of policies, the growth rate of sales area changed from negative to positive, with a growth rate of 7% in the current month, and peaked to 44.1% in April 2016.
September 30, 2014: the standard of “house and loan recognition” was revised. On September 30, the national easing characterized by the relaxation of loan restrictions was opened: the identification standard of the second house was changed from “recognizing both houses and loans” to “recognizing loans but not houses”. In November of the same year, the central bank restarted the interest rate cut.
March 30, 2015: reduce two sets of down payment and business tax reduction. The market showed no obvious signs of recovery, and real estate investment fell to the freezing point. On March 30, the five ministries and commissions reduced the down payment ratio of second homes to 40%, and the exemption period of business tax on the sale of houses was shortened from five years to two years. The reduction of the down payment ratio directly improved the residents’ leverage level, and the business tax reduction and exemption stimulated the residents’ enthusiasm for changing houses. Since then, the central bank has cut interest rates three times and reserve requirements two times.
September 30, 2015: reduce the down payment for the first set and the second set. On September 30, the four ministries and commissions issued two new policies to reduce the down payment ratio of the first commercial loan in non restricted cities to 25%; At the same time, we will increase the amount of provident fund loans and comprehensively implement non local loans. Since then, the down payment ratio of the first set of commercial loans has been reduced to 20%, and the down payment ratio of the second set has been reduced to 30%. The central bank has cut interest rates and reserve requirements once again, with preferential interest rates superimposed on low down payment, and the credit is in a comprehensive loose state. At the same time, the central economic work conference in December 2015 proposed the “destocking” of the five major tasks of supply side reform, strengthened the monetization of shed reform, and launched the real estate market in the first and second tier cities.
In February 2016, the Ministry of finance, the State Administration of Taxation and the Ministry of housing and urban rural development jointly issued the notice on adjusting the preferential policies for deed tax and business tax in real estate transactions, which stipulates that “the deed tax on the purchase of houses below 90 square meters shall be reduced to 1%, and the first and second suites above 90 square meters shall be reduced to 1.5% and 2% respectively”. This is the last major national policy of this round of regulation and control. So far, the four moves of “stimulus combination fist” have been exhausted. Since then, the national regulation and control withdrew and began to emphasize the “implementation of policies due to the city”, which is reflected in two aspects: one is the tightening of hot cities, and the other is the continued destocking of non core cities.
The long-term mechanism emphasizes “implementing policies according to the city”. There are 22 pilot cities of long-term mechanism: four first tier cities in Beijing, Shanghai, Guangzhou and Shenzhen and 18 second tier cities in Nanjing, Suzhou, Hangzhou, Xiamen, Fuzhou, Chongqing, Chengdu, Wuhan, Zhengzhou, Qingdao, Jinan, Hefei, Changsha, Shenyang, Ningbo, Changchun, Tianjin and Wuxi. The policy adjustment of these cities is of great signal significance.
At the policy level, there is basically no room for relaxation in first tier cities. Second tier cities have large relaxation space, but the urban differentiation is serious. Second tier cities represented by Hangzhou: low inventory, high pressure of price rise, and no urgent policy relaxation; Second tier cities represented by Zhengzhou: high inventory, weak market, and urgent policy relaxation. The high inventory and weak market in the third and fourth tier cities need to be fully relaxed.
(1) first tier cities: as the market recovers, the main policy space is to reduce the interest rate of commercial loans. From the historical experience, the first tier cities have a faster pace from policy relaxation to market rebound;
At present, the inventory of first tier cities is at an all-time low. In January 2022, the de urbanization cycle of first tier cities will be about 15.8 months. The first tier cities represented by Beijing and Shanghai have ushered in the spring of the property market. Among them, the sales area of commercial housing in Shanghai changed from negative to positive year-on-year, with a year-on-year increase of 20.2% in February.
At present, the main policy space is to reduce the interest rate of commercial loans. At present, the loan interest rate of the first house in Beijing, Shanghai, Guangzhou and Shenzhen is LPR plus 55, 35, 80 and 30bp, and the loan interest rate of the second house is LPR plus 105, 105, 100 and 60BP. Historically, the prime lending rate is 0.7 times of the benchmark interest rate, and the current LPR is 0.7 times, about 3.2%, which is equivalent to a reduction of 138bp.
(2) second tier cities: high inventory, loose regulation and large policy space. According to historical experience, it takes three months for the second tier cities from loose policy to stable market
Inventory in second tier cities showed an upward trend. In January 2022, the urbanization cycle of the second tier sample cities is about 23.1 months.
At present, the market differentiation is obvious.
Second tier cities represented by Hangzhou: low inventory, high pressure of price rise, and no urgent policy relaxation. The market of second tier cities in the Yangtze River Delta such as Hangzhou and Nanjing recovered. In January, the sales area of commercial houses in Hangzhou and Nanjing increased by 3.5% and 13.7% respectively year-on-year; In January 2022, the decommissioning cycle in Hangzhou is about 6.4 months and that in Suzhou is about 15.6 months, with a relatively low inventory level; The decontamination cycle of Changsha is about 18 months, while the transaction price of commercial housing increased by 26.9% year-on-year, and the pressure of price rise is relatively large.
Second tier cities represented by Zhengzhou: high inventory, weak market, and urgent policy relaxation. For example, in Zhengzhou, since the second half of 2021, due to the impact of severe rainstorms and repeated epidemics, the transaction area of real estate market has shrunk significantly. In December 2021, the transaction area of commercial housing decreased by 67.7% year-on-year, and the cumulative transaction area of commercial housing in the whole year was 18.044 million square meters, down 31.4% from the previous year.
In January 2022, the decontamination cycle of Zhengzhou is about 17.6 months. Among the 18 long-term mechanism pilot second tier cities, similar cities include Chongqing, Chengdu, Wuxi, Fuzhou, Shenyang, Qingdao, Jinan, Hefei and Changchun. In January 2022, the decontamination cycle is about 20.6, 30.3, 19.3, 31.9, 24.1, 28.0, 23.7, 18.8 and 30.3 months respectively, and the inventory is at a high level.
For second tier cities, the space for regulation and relaxation mainly includes:
Adjust the purchase restriction: make a breakthrough in the purchase restriction policy mainly through the talent introduction policy and the family affiliation policy.
Adjust the loan restriction: adjust the recognition standard of the first house, reduce the commercial loan interest rate, reduce the down payment proportion of the provident fund, and increase the loan amount of the provident fund.
Relax the price limit: raise the pre-sale price limit of new houses and the evaluation price of second-hand houses.
Land: adjust the minimum proportion of land auction deposit and pay the land transfer fee by stages. Sales restriction: shorten the service life.
Historical experience shows that second tier cities will pick up three months after the policy is relaxed.
(3) third and fourth tier cities: the sales are sluggish, and there is a lot of room for policy relaxation. The policies of third and fourth tier cities have been relaxed until the market has been stable for more than 6 months.
The inventory of third and fourth tier cities is at an all-time high. The de urbanization cycle of the third and fourth tier cities in the sample is about 19.9 months.
At present, the sales continue to be depressed and the market toughness is poor. Since June 2021, the transaction area of commercial housing in the sample third and fourth tier cities has remained negative year-on-year. In January 2022, the transaction area of commercial housing in the sample third and fourth tier cities was 9.742 million square meters, a year-on-year increase of – 45.3%; In February, the transaction area of commercial housing was 6.467 million square meters, with a year-on-year decrease of – 48.4%, an increase of 3.1 percentage points.
Three major factors affecting the third and fourth tier demand: the explosion of real estate enterprises has triggered residents’ concerns about future house delivery, the local new year policy has led to the delay of home purchase demand, and the exit of monetized resettlement of shed reform has affected the market demand. Among them, the monetized resettlement of shed reform is the most important factor affecting the market demand of the third and fourth tier. Since 2015, the monetized resettlement of shed reform has been vigorously promoted. From 2016 to 2017, the inventory of the third and fourth tier cities through the monetized resettlement of shed reform was 140 million square meters and 180 million square meters respectively, accounting for 14.8% and 18% of the sales area. There was a certain overdraft on the housing demand of the third and fourth tier cities, from the inventory of developers to the inventory of residents, Those third and fourth tier cities without industrial introduction and population inflow will face a long-term adjustment of supply and demand pattern in the real estate market. At present, the monetized resettlement of shed reform has withdrawn from the market, the rising effect of just need is no longer, and it still takes time for the market to recover.
For the third and fourth tier cities, there is a large space for regulation and relaxation, mainly including:
Cancellation of purchase restriction: at present, only a few third and fourth tier cities still implement purchase restriction policies, such as Zhuhai, Dongguan, Foshan, Langfang, etc., which are expected to be relaxed in the future.
Adjustment of loan restriction: including raising the loan limit of provident fund, reducing the down payment ratio of provident fund, accepting loans but not houses, reducing the down payment ratio of second house, reducing the commercial loan interest rate and down payment ratio, etc.
House purchase subsidies: house purchase deed tax subsidies, house price subsidies, area subsidies, etc.
The policy is expected to take effect in more than 6 months. Looking back on the real estate regulation and control cycle from 2014 to 2016, the cumulative value of commercial housing sales area in the third and fourth tier cities returned to positive seven months after the calendar year, with October (- 3.7%), November (- 3.0%), December (- 1.2%), January (0.3%), February (- 4.1%), March (- 1.1%), April (- 1.1%) and may (0.5%). At present, the monetized resettlement of shed reform has withdrawn from the market, the core variables affecting the third and fourth tier demand have disappeared, and the recovery of the third and fourth tier market may take longer.
By accurately identifying new citizens and adjusting purchase and loan restrictions, the potential rigid housing demand will be released
On March 4, the CBRC and the Central Bank jointly issued the notice on strengthening financial services for new citizens, proposing to optimize housing financial services to meet the housing needs of new citizens. Specifically include: implement differentiated housing credit policies according to urban policies, reasonably determine the first housing loan standard for new citizens who meet the purchase conditions, and improve the convenience of borrowing and repayment; Encourage commercial banks to strengthen cooperation with local governments and improve the service level of new citizens’ housing provident fund.
New citizens mainly refer to the various groups that have come to live in cities because of their causes of employment, children’s schooling and their children’s support. They have not obtained local registered residence or registered residence for three years, including but not limited to migrant workers, new graduates and so on. At present, there are about three hundred million people. By strengthening new citizens’ house purchase credit and financial services, the potential rigid housing demand will be released.
Risk tips: market downturn exceeds expectations, sample city data deviation, etc
