The positive news in the real estate sector is still spreading.
On May 17th, the Housing Fund Management Center of Henan Provincial Government issued a notice stating that the new interest rate for personal housing provident fund loans will be implemented. The interest rate for first home provident fund loans with a term of more than five years will be lowered from the current 3.1% to 2.85%, and the interest rate for second home provident fund loans with a term of more than five years will be lowered from the current 3.575% to 3.325%.
On the same day, Jiangxi, Hefei, Chengdu and other places also issued notices stating that the interest rate of provident fund loans will be lowered from tomorrow, and the existing loans will be adjusted on January 1, 2025.
After the central bank issued three "big red envelopes", including reducing down payments, canceling the lower limit of interest rates, and lowering housing provident fund loan interest rates, many regions have accelerated their follow-up and implementation.
This positive news has also spread to the US stock market. Data shows that before the US stock market opened, most Chinese concept real estate stocks rose sharply, while many real estate stocks rose by over 450% and shell stocks rose by over 8%. Most of the other popular Chinese concept stocks also rose, with Bilibili up 1.7%. After the opening of the US stock market, most of the popular Chinese concept stocks rose, while the housing and long sectors continued to soar, rising by over 320% during the trading session, triggering a circuit breaker.
Affected by the positive news, all three major stock indexes in A-share market closed up more than 1%, with the real estate sector experiencing a significant increase. According to Wind data, as of the close, the A-share real estate index led the way with a 7.01% increase, with nearly 30 stocks hitting the limit up; In addition, the real estate sector of the Hong Kong stock market also led the rise, with a growth rate of 4.42%. Among them, Jingrui Holdings increased by 238%, four stocks including Guangdong Hong Kong Bay Holdings increased by more than 40%, and 14 stocks increased by more than 20%.
Multiple underground adjustments to housing provident fund loan interest rates
On May 17, the official account of "Henan Provincial Housing Provident Fund" also released the Notice on Reducing the Interest Rate of Individual Housing Provident Fund Loans.
The notice states that according to the "Notice on Lowering the Interest Rate of Personal Housing Provident Fund Loans" issued by the People's Bank of China on May 17, 2024, provincial personal housing provident fund loans will be subject to new interest rates:
One is the interest rate for the first personal housing provident fund loan: for loans with a term of less than five years (including five years), the current 2.6% will be lowered to 2.35%, and for loans with a term of more than five years, the current 3.1% will be lowered to 2.85%. The interest rate for the second set of personal housing provident fund loans is reduced from the current 3.025% to 2.775% for loans with a term of less than five years (including five years), and from the current 3.575% to 3.325% for loans with a term of more than five years.
Secondly, for personal housing provident fund loans issued before May 18, 2024, the original interest rate will still be applied from May 18, 2024 to December 31, 2024, and the lowered interest rate standard will be implemented from January 1, 2025.
Thirdly, for individual housing provident fund loans that have already been accepted and the loan disbursement date is after May 18, 2024 (inclusive), the lowered interest rate standard will be implemented.
On the same day, the "Hefei Release" official account released the Notice on Reducing the Interest Rate of Individual Housing Provident Fund Loan.
It is proposed to adjust the personal housing provident fund loan interest rate in Hefei City from May 18, 2024. Firstly, the personal housing provident fund loan interest rate will be lowered by 0.25 percentage points. The loan interest rates for the first set of personal housing provident fund loans under 5 years (including 5 years) and over 5 years will be adjusted to 2.35% and 2.85%, respectively. The loan interest rates for the second set of personal housing provident fund loans under 5 years (including 5 years) and over 5 years will be adjusted to not less than 2.775% and 3.325%, respectively. Secondly, personal housing provident fund loans issued after May 18, 2024 (inclusive) shall be executed at the new interest rate. Personal housing provident fund loans issued before May 18, 2024 that have not yet matured shall be subject to the new interest rate starting from January 1, 2025.
The central bank issues three consecutive "big red envelopes"
On the afternoon of May 17th, the People's Bank of China and the State Administration of Financial Supervision issued three "big red envelopes", including a reduction in down payment, a reduction in the lower limit of interest rates, and a reduction in the interest rate of provident fund loans.
Among them, the minimum down payment ratio for first home commercial loans has been adjusted to no less than 15%, and the minimum down payment ratio for second home commercial loans has been adjusted to no less than 25%. At the same time, the lower limit of commercial loan interest rates for first and second homes at the national level will be lifted. In addition, starting from May 18th, the personal housing provident fund loan interest rate will be lowered by 0.25 percentage points, the first home provident fund loan interest rate for more than 5 years will be adjusted to 2.85%, and the second home provident fund loan interest rate will be adjusted to 3.325%.
Zhang Dawei, Chief Analyst of Zhongyuan Real Estate, believes that the record breaking reduction in down payments this time will guide the actual down payment ratio and interest rate of personal housing loans to decline, which will help reduce the burden and cost of down payments for residents, directly reduce the borrower's housing loan expenses, enhance their purchasing ability and willingness, and boost their consumption willingness. For the whole country, the impact is enormous, especially in first and second tier cities. Currently, cities such as Beijing will significantly reduce the down payment ratio and interest rates.
Chen Wenjing, Market Research Director of Zhongzhi Research Institute, pointed out that currently, many cities in China have reduced the down payment ratio for first homes to 20% and second homes to 30%, with only a few cities having higher down payment ratios. For example, the down payment ratio for first homes in first tier cities is 30%, while the down payment ratio for second homes ranges from 40% to 50%. After the central bank lowers the lower limit of down payment ratio this time, it is expected that more cities will follow up and implement it. There is also room and expectation for downward adjustment in first tier cities, further lowering the threshold for homebuyers to purchase. At the same time, the reduction of housing provident fund loan interest rates will further reduce the cost of home purchase for homebuyers.
Chen Wenjing also pointed out that the lower limit of interest rates for first and second home loans at the national level will be abolished, and the power to regulate the lower limit of housing loan interest rates will be given to local governments. According to data released by the central bank, as of the end of March, out of 343 cities (prefecture level and above) in China, 75 have lowered the lower limit of first home loan interest rates and 64 have cancelled the lower limit. According to the China Index monitoring, over 20 cities have announced the phased cancellation of the lower limit of interest rates for first-time home loans starting from April; In May, Nanjing and Hefei successively announced the cancellation of the lower limit of interest rates for first-time home loans. Currently, some banks in some cities have implemented a first home loan interest rate of around 3.1%. The central bank has lifted the lower limit of national housing loan interest rates, and the policy benefits have been extended to second homes. It is expected that more cities will lower housing loan interest rates, and the space for lowering housing loan interest rates in first tier and core second tier cities is also expected to open up.
Zhang Hongwei, founder of Mirror Mirror Consulting, believes that after the meeting of the Central Political Bureau on April 30th, the destocking policy in core first and second tier cities has gradually been implemented. This time, the central bank has lowered the down payment ratio for first and second homes, cancelled the lower limit of commercial loan interest rates for first and second homes, and lowered the provident fund loan interest rate by 0.25 percentage points. At the same time, clear adjustments have been made to the policy of purchasing existing housing. It is expected that specific policies will be implemented in various cities in the next few months.
"The policies of lowering down payments, lowering interest rates, and the national team's housing policy have all come, representing the country's determination to stabilize the real estate industry. Based on the increased release of policies in various regions, the national level has comprehensively promoted policy easing for the real estate industry. The determination of the country to promote the real estate industry and economic recovery has exceeded expectations." Zhang Dawei said.