Events
On May 20, 2022, the Central Bank of China kept the one-year loan market quotation rate (LPR) unchanged at 3.70%; The five-year loan market quoted rate (LPR) was lowered from 4.60% to 4.45%.
Commentary
The five-year LPR saw the largest decline, and the determination to stabilize the real estate market was firm. After the central bank and the China Banking and Insurance Regulatory Commission lowered the lower limit of the first house loan interest rate on May 15 and Premier Li Keqiang pointed out on May 18 that we should “stabilize the price and stabilize the house price, support the reasonable housing demand of residents and maintain the steady and healthy development of the real estate market”, the central bank reduced the five-year LPR by 15bp to 4.45%, the largest single decline since the implementation of the LPR mechanism, far exceeding market expectations. Different from the previous adjustment of LPR, the one-year LPR has not been adjusted, and the five-year LPR has been significantly reduced, which can be regarded as a directional reduction of housing loan interest rate. On the one hand, it reflects the severe situation of the current real estate industry (we discussed the reasons for the downward decline of the predicted housing loan interest rate in the external report “policy relaxation and overall overweight, strengthening confidence and increasing real estate”), on the other hand, it reflects the central government’s support for rigid and improved housing demand Determination to stabilize the real estate market.
Both incremental stocks benefit and promote the release of demand. Since the announcement of the lower limit of the first mortgage interest rate, local banks have actively promoted it. As of May 19, according to incomplete statistics, the mortgage interest rate of 4.4% has appeared in 20 cities such as Guangzhou, Shenzhen, Chongqing, Zhengzhou and Yibin (covering the first, second, third and fourth tier cities). After the LPR reduction, the lower limit of the first house loan interest rate was adjusted to 4.25% (a historically low level), and the lower limit of the second house loan interest rate was adjusted to 5.05%. Taking the first house loan of 1 million (30-year equivalent principal and interest) as an example, the interest rate of 4.25% was 5.17% higher than the national mainstream mortgage interest rate in April, the monthly supply was reduced by 550 yuan, and the total loan repayment was reduced by 200000 yuan. For the incremental market, whether buying the first or second houses, the loan interest rate has decreased, which is expected to effectively promote the release of house purchase demand; At the same time, for the stock market, the mortgage interest rate will also be reduced with the change of LPR, and the loan repayment pressure of stock houses will also be reduced, which can moderately improve the purchasing power of residents.
It is more difficult to lower the lower limit of short-term mortgage interest rate, and the follow-up policies may pay more attention to synergy. ① The adjustment of the lower limit of the first house loan interest rate and the 15bp reduction of the LPR are major interest rate adjustments. The last time the lower limit of the interest rate was adjusted was in August 2019 (the linkage between the housing loan interest rate and the LPR was implemented). We believe that it is less likely to adjust the loan interest rate again at the national level in the short term. ② If the real estate market continues to be depressed after a series of loose policies are introduced, and the subsequent policies may pay more attention to synergy. At present, although the mortgage interest rate has been reduced and most cities have liberalized the purchase restriction requirements, the down payment ratio of second homes in some cities is still high, the recognition standard of second homes is also relatively strict, and the purchase threshold is relatively high. It is expected that the down payment ratio will continue to be reduced, the loan restriction standard will be reduced or the scope of deregulation will be expanded, Various policies work together to promote the stable development of the real estate market.
The base of market sales area in the second half of 2021 is small, and it is expected to rebound year-on-year in the third quarter of 2022. The current round of loose regulation and control began in March 2022. Up to now, the mortgage interest rate and down payment ratio in most cities on the credit side have been reduced; On the demand side, except for the first tier cities, most cities (including new first tier cities with good fundamentals such as Hangzhou and Chengdu) have requirements for liberalizing purchase and sales restrictions; The supply side has relaxed the supervision on the pre-sale funds of real estate enterprises and gradually increased the financing support for private enterprises. Compared with the 201416 cycle, the policy easing was started in June 2014. Since August, the year-on-year decline of national commercial housing sales has gradually decreased, the year-on-year growth resumed in early 2015, and the adjustment cycle is more than half a year. In this round of regulation and control cycle, affected by the epidemic disturbance and the high base in the first half of 2021, it is expected that the market sales in the first half of 2022 will remain negative year-on-year. Assuming that the market sales in the second half of 2022 will return to the average level of the previous five years, under the background of low base in the second half of 2021, the monthly sales area is expected to return to positive year-on-year from the third quarter (August), and the first and second tier cities and Yangtze River Delta cities with good fundamentals will take the lead in warming up.
Investment advice
At present, the loose policy of real estate regulation and control continues to be issued, and we are firmly optimistic about the annual real estate market. It is expected that the first and second tier cities and Yangtze River Delta cities with good fundamentals will take the lead in stabilizing and warming, and improve the demand or the traction of this round of market warming. The first real estate enterprises to focus on high-quality cities and improve products, such as Greentown China, China Construction Development International and Hangzhou Binjiang Real Estate Group Co.Ltd(002244) . It is prudent to recommend the head state-owned enterprises and central enterprises with healthy financial structure and safe cash flow, such as Poly Developments And Holdings Group Co.Ltd(600048) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) .
Risk tips
The loose policy did not give a good boost to the market; The epidemic situation affects market recovery; Several real estate enterprises have defaulted on their debts
