Event: on May 20, the people’s Bank of China authorized the national interbank lending center to announce that the quoted interest rate (LPR) of the loan market is: the one-year LPR is 3.7%, unchanged from the previous value, and the LPR over five years is 4.45%, down 15bp from 4.6% of the previous month.
The 5-year LPR cut 15bp higher than expected, further strengthening the confidence of stabilizing real estate. On May 15, the central bank and the China Banking and Insurance Regulatory Commission jointly issued the document “adjusting differentiated housing credit policies”. For resident families who borrow to buy ordinary self owned houses, the lower limit of the interest rate of the first set of personal housing loans is adjusted to LPR minus 20 basis points, and the lower limit of the second set of housing is still LPR. Combined with the five-year LPR reduction, the lower limit of the first house mortgage interest rate has been reduced from 4.6% to 4.25%, and the lower limit of the second-hand house is 4.45%. In April 2022, the interest rate of the first mortgage and the second mortgage in 103 key cities monitored by the shell Research Institute was 5.17% and 5.45%, respectively 17 and 15 basis points lower than that in March, significantly higher than the current lower limit. In addition to the incremental mortgage, the deposit mortgage will also benefit from this reduction. Taking the 30-year 3 million yuan mortgage as an example, if the principal and interest are the same, the interest rate is 4.6% and the monthly payment is 15379 yuan; If the interest rate drops to 4.25%, the monthly payment will be 14758 yuan, a decrease of 621 yuan, and the total loan repayment will be reduced by about 220000 yuan. The recent combination boxing is actually a further extension of the “23 financial measures” on April 18, strengthening the confidence of supporting the steady growth of real estate this year.
Looking back on history, the rhythm of interest rate and reserve requirement reduction in this cycle is slow, and the market presents Nike recovery. It needs to cooperate with the loosening of the identification standards of the first house to form a combination fist to boost demand. Looking back on the relaxation cycle in 2008 and 2014, the continuous interest rate reduction policy combined with the lower limit of the first set of loan interest rate was reduced to 0.7 times of the benchmark loan interest rate, which led to the rapid decline of housing loan interest rate. In 2008, the actual recognition of the second house was relaxed, and in 2014, there was a change from “recognizing the house and recognizing the loan” to “recognizing the loan but not recognizing the house”. A large number of improved second house buyers enjoy the down payment ratio of the first house loan and preferential interest rate, forming effective support for demand. The current market decline is comparable to that of 08.14, but the urbanization rate, residents’ leverage ratio and residents’ confidence are less than that of 08.14. Therefore, we believe that the overall relaxation intensity of this cycle is comparable to that of 08.14, but the pace is slow. The market will show Nike recovery, the slope will slow down, and the cycle will be lengthened accordingly. The four limit policy in core cities is expected to be gradually opened to further boost the demand for house purchase.
In April, the sales decline further expanded, and the decontamination cycle improved significantly. It is expected that the policy direction will focus on boosting sales and enterprise financing. According to the data of the central index, the sales amount of commercial houses in 102 sample cities in April was 364.8 billion yuan, a month on month decrease of 23.2% and a year-on-year decrease of 57.2%, an increase of 12.1pct over the previous month. In April, the inventory area of new houses in 49 sample cities was 338.51 million m3, with a month on month increase of 1.3% and a year-on-year increase of 2.9%. Due to the decline in sales boom, the de urbanization cycle of the national sample cities has risen rapidly, from August 1, 2021 to April 15.9, 2022. We believe that the goal of this round of recovery cycle is expected to be sales support rather than promotion, which is significantly warmer than returning to the high level compared with the bottom. Our prediction of the future trend of the policy includes: 1. The four limit policies such as purchase and loan restrictions in core cities are gradually relaxed; 2. Mortgage interest rates continued to decline; 3. Improve the financing channels of enterprises; 4. Establishment of stabilization fund; 5. Open the equity financing window, etc.
Investment suggestion: the cause of steady growth is not competitive, and the rating of “overweight” in the real estate development sector is maintained. We believe that the core point of this round of policy stimulus lies in the demand side (Sales) and enterprise capital side (financing). The tightening of the combination fist should correspond to the relaxation of the combination fist. This year is a large-scale policy easing cycle, which is a beta market. Real estate enterprises with good credit qualification, sufficient liquidity, sufficient soil reserves and high quality are the main choice. It is suggested to pay attention to: A shares Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , China Vanke Co.Ltd(000002) , Poly Developments And Holdings Group Co.Ltd(600048) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Gemdale Corporation(600383) , Huafa Industrial Co.Ltd.Zhuhai(600325) , Shenzhen Overseas Chinese Town Co.Ltd(000069) ; H shares green city China, China Resources Land, China overseas development, Longhu group, China Jinmao, Xuhui holding group, China Overseas Hongyang. Property management: China Resources Vientiane life, green city service, Zhonghai property, poly property, country garden service, Yongsheng life service, China Merchants Property Operation & Service Co.Ltd(001914) .
Risk warning: the epidemic situation repeatedly exceeded expectations; The tightening of epidemic prevention policies exceeded expectations; The downward trend of fundamentals exceeded expectations; Policy relaxation was less than expected
