Matters:
According to the announcement of the national interbank lending center authorized by the people’s Bank of China, the quoted interest rate (LPR) of the loan market on May 20, 2022 is: the one-year LPR is 3.7%, which remains unchanged; LPR over 5 years was 4.45%, down 15bp from 4.6% last month.
Ping An View:
After LPR restructuring, the first five-year period fell by 15bp, which is of great significance to guide the downward signal of housing loan interest rate. In May, the five-year LPR was reduced to 4.45%, a decrease of 15bp compared with 4.6% last month, the largest single decline in the five-year period after LPR restructuring. According to the total price of 1 million yuan, the down payment of 50%, the mortgage interest rate of 4.6%, the corresponding monthly supply under the 30-year mortgage and equal principal and interest repayment method is 2563 yuan / month. If the mortgage interest rate decreases by 15bp, the corresponding monthly supply decreases by 1.7%. In combination with the central bank’s reduction of the lower limit of the first house mortgage interest rate to 20bp in the five-year LPR on May 15, it means that after the reduction of the five-year LPR this month, the lowest first house mortgage interest rate can be reduced to 4.25%. The space for the reduction of mortgage interest rate is further opened, and the downward signal of guiding mortgage interest rate is obvious.
Mortgage interest rates fell rapidly and are expected to continue to improve in the future. In April, the interest rate of the first house loan in the mainstream of 103 key cities monitored by the shell Research Institute was 5.17%, which was 1.16 times of the five-year LPR in May, and the upward proportion was still at a historically high level. Compared with the two rounds of low points in 2009 Q2 and 2016 Q3, from the absolute value difference, the benchmark price difference in the same period and the relative ratio difference with the benchmark, the potential downward space of the current mortgage interest rate is still sufficient. In terms of benchmark interest rate, compared with the historical value of 5-year LPR in May and the medium and long-term loan interest rate of more than 5 years, the current 5-year LPR has been at a historical low, and the subsequent mortgage interest rate has been improved or optimized in terms of benchmark points. According to the financial Associated Press, after the central bank lowered the minimum first home loan interest rate, Zhengzhou, Tianjin and other places successively lowered the first home loan interest rate to 4.4% (the five-year LPR was reduced by 20bp in April). It is expected that the first home loan interest rate in more pressure cities will move closer to the lower limit in the future.
The end of the second quarter and the beginning of the third quarter are the sales observation window period, and the slope of this round of recovery may be lower than that in the past. Recently, the policy deregulation and urban energy level have continued to rise, the proportion of down payment and mortgage end have increased, and the recent epidemic has been gradually controlled. Multiple factors are expected to form resonance, laying the foundation for sales stabilization. However, considering the lack of confidence in the property market and the weakening of the income expectation of home buyers caused by repeated epidemics, the elasticity of sales recovery may be less than that in the past cycles (20082009 and 20142016). In terms of real estate enterprises, with policies to maintain stability and multiple measures to resolve the credit risks of real estate enterprises, we believe that the differentiation between real estate enterprises will be accelerated, and the cash flow of private enterprises is expected to be alleviated in the second half of the year. Central state enterprises and high-quality private enterprises with strong operation and strong credit may more actively grasp the land acquisition window and usher in development opportunities.
Investment suggestion: with the policy force and the resonance of recovery after the epidemic, we believe that the end of the second quarter and the beginning of the third quarter are an important observation window period for the stabilization of the real estate market. In the second half of the year, the industry is expected to gradually usher in the honeymoon period of policy easing and sales recovery, and the sector valuation is expected to be gradually repaired. The development sector is mainly concerned about: one is the relaxation of short-term benefit policies and the improvement of gross profit margin at the land acquisition end, strong operating and high credit enterprises that are expected to seize market share in the medium and long term, such as Poly Developments And Holdings Group Co.Ltd(600048) , China Vanke Co.Ltd(000002) , Gemdale Corporation(600383) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , Shenzhen Tagen Group Co.Ltd(000090) , etc; One is the subject matter of policy game elasticity with certain support for Fundamentals, such as Seazen Holdings Co.Ltd(601155) , Jiangsu Zhongnan Construction Group Co.Ltd(000961) , etc. The valuation of the property management sector has reached an all-time low. With the deregulation of policies and the improvement of real estate enterprise funds, it is expected to bring high-quality property enterprise valuation repair. Attention is paid to country garden service, poly property, China Merchants Property Operation & Service Co.Ltd(001914) , xinchengyue service, Xingsheng commerce, etc.
Risk tips: 1) the short-term fluctuation of the real estate industry exceeds the expected risk; 2) The fermentation and chain reaction of individual real estate enterprises’ liquidity problems exceed the expected risks; 3) The timeliness of policy improvement is lower than the expected risk.
