(Economic Watch) Three important signals from the rate cut in the beginning of the year to the Chinese property market

  China News Agency, Beijing, January 20 (Reporter Pang Wuji) What does the interest rate cut in 2022 mean for the real estate market?

  On the 20th, the People's Bank of China authorized the National Interbank Funding Center to announce the latest market quoted interest rate (LPR) for loans: 1-year LPR is 3.7%, and 5-year LPR is 4.6%.

They were down 10 basis points and 5 basis points from December last year, respectively.

This is the continuous reduction since the 1-year LPR was lowered in December last year. It is also the first time in 21 months that the LPR with a 5-year or more period referenced by mortgage interest rates has been lowered again.

On the whole, the rate cut at the beginning of the year has brought three important signals to the Chinese property market.

  First, the signal of "stabilizing the property market".

Li Yujia, chief researcher of the Guangdong Housing Policy Research Center, believes that this rate cut is a signal of greater significance for the property market.

The last time the 5-year LPR was lowered was in April 2020, and it has been on hold for a long time.

  Since the second half of last year, China's real estate market has cooled rapidly.

Li Yujia believes that in December, the 5-year LPR did not fall, mainly because the property market was bottoming out in the previous two months, and he was worried that the rate cut would send a signal to stimulate the property market.

However, recently released data show that in December last year, a number of property market indicators including real estate investment and new housing starts fell sharply.

Taking into account the requirements of "three stability" and "three guarantees" (guaranteeing the delivery of buildings, protecting people's livelihood, and maintaining stability), it is necessary to stabilize the expectations of the property market, which is the biggest effect of this rate cut.

  Zhang Bo, dean of the 58 Anju Room Real Estate Research Institute, also believes that the benefits of the reduction in the LPR interest rate for more than 5 years will be reflected in the two aspects of housing enterprise financing and residential mortgage loans.

In view of the "three-tier and four-tier" financing management of real estate enterprises, the financing difficulty and financing cost of real estate development enterprises will be reduced to a certain extent.

at the same time.

The reduction in the LPR will reduce the interest expense on personal mortgages, which will, to a certain extent, stimulate a slight recovery in the popularity of housing purchases.

However, he also pointed out that, compared with other effects of the rate cut, its impact on the mentality of home buyers is more worthy of attention.

  Second, the "housing, not speculation" signal.

It is worth noting that the reduction in the LPR with a period of more than 5 years is lower than that of the LPR with a period of 1 year.

In fact, since the LPR reform in August 2019, the 1-year LPR has been reduced more, and the "asymmetric interest rate cut" method in which the 5-year LPR has been reduced less has become the norm.

Over the past two years, the 1-year LPR has been lowered several times, but since the mortgage interest rate refers to the 5-year or longer LPR, under the positioning of "housing, not speculating," this indicator changes relatively cautiously.

Li Yujia believes that this asymmetric interest rate cut is also sending a stable but not stimulating signal.

  Wen Bin, chief researcher of China Minsheng Bank, pointed out that the decline in LPR with a maturity of more than 5 years will help boost housing consumption demand and stabilize the growth rate of mortgage loans.

At the same time, the LPR with a maturity of more than 5 years was not reduced by 10 basis points in the same range as the MLF (Medium-Term Lending Facility) interest rate, but decreased by 5 basis points, reflecting the requirement of maintaining a virtuous circle and healthy development of the real estate industry.

  Zhang Dawei, chief analyst of Centaline Real Estate, believes that the rate cut will not bring about an overheating of the property market.

First of all, the interest rate cut this time is relatively small, and the reduction in mortgage loans is not significant. The monthly payment for a loan of 1 million yuan (RMB, the same below) (30-year term) is only reduced by about 30 yuan.

Moreover, the current real estate industry is not facing a simple capital problem. There are pressures in all aspects of land acquisition, sales, customer sources, loans and even competition for homogeneous products.

Judging from the current monitoring data, interest rates in many cities have changed slightly, but whether the current bank mortgage loan is loose still mainly depends on the change in the lending speed.

  Third, the property market has accelerated to bottom out.

After the "policy bottom" appears, the property market is expected to have a "market bottom".

Zhang Dawei believes that the interest rate cut means that the market mortgage loan is gradually developing in a stable direction.

After the policy bottom appeared in the property market in the fourth quarter, the market bottom will begin to appear in the first quarter of 2022.

  Li Yujia pointed out that from the data in December and January, the property market is still weak, mainly due to the credit risk of developers, the control of credit leverage, and the weak land market.

At present, expectations have weakened, and demand contraction has led to industry stability and financial risks. The demand for stabilizing the property market is greater than the demand for continuing to control the property market.

He believes that the property market may begin to bottom out in the first quarter due to interest rate cuts, home purchases, housing consumption during the Spring Festival, and rescue of the property market in various places.

  Xu Xiaole, chief market analyst of the Shell Research Institute, said that it is expected that more cities will reduce mortgage interest rates in the later period and the credit environment will be more friendly.

This is conducive to the release of reasonable housing demand and promotes a virtuous circle and healthy development of the real estate industry.

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