Housing Market Rebounds as New Policies Take Effect
On October 17th and 18th, two significant press conferences attracted market attention, conveying a strong "stabilize the real estate market" signal.
On October 17th, the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, the Ministry of Natural Resources, the People's Bank of China, and the China Banking and Insurance Regulatory Commission jointly held a press conference. The heads of these five central departments appeared together to introduce the "combination of policies" for stabilizing the real estate market and released an official judgment that "China's real estate market has begun to bottom out." On October 18th, the National Bureau of Statistics released relevant data on the real estate market for January-September this year, with the decline in several key figures continuing to narrow.
In fact, since the end of September this year, under the support of a series of policies to boost the real estate market, market confidence has been continuously restored, showing an overall trend of stabilization. Data from the China Index Academy shows that from October 1st to 20th, 2024, the number of new commercial residential transactions in Beijing reached 2,719 units, with a transaction area of 311,000 square meters, increasing by about 56% and 52% respectively compared to the same period in September.
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Market
Transaction volume has significantly increased, and the heat continues after the holiday
After the "National Day" holiday, the Beijing real estate market has seen a noticeable increase in temperature. In the two weeks after the holiday, although most are working days, the market heat remains unabated. From the national policy and market news level, it is also continuously releasing positive signals.
On October 17th, at the press conference jointly held by the Ministry of Housing and Urban-Rural Development and other five central departments, the "combination of policies" for the real estate market, including "four cancellations, four reductions, and two increases," was mentioned. Minister Ni Hong of the Ministry of Housing and Urban-Rural Development stated at the meeting: "Under the influence of a series of policies, after three years of adjustment, China's real estate market has begun to bottom out."
On October 18th, data released by the National Bureau of Statistics showed that from January to September this year, the national new commercial housing sales area reached 700 million square meters, with a sales volume of 6.9 trillion yuan, and the decline continued to narrow. From January to September, the national real estate development investment and the area of new housing starts continued to narrow for seven consecutive months.
Xu Yuejin, Deputy Director of Research at the China Index Academy, analyzed that from the data, at the national level, the willingness of residents to buy houses has been repaired. At the level of key cities, after the support policy was introduced at the end of September, the market sentiment has significantly improved, and the market heat in core cities during the National Day holiday was significantly higher than before the holiday.
A series of favorable policies and official statements have also brought significant changes to the market. The sales office is crowded with people, transaction numbers continue to rise, and the decision-making cycle for buyers has been shortened... Recently, many on-sale housing projects in Beijing have felt the temperature of the market's recovery.Located outside the West Fifth Ring Road in Beijing, within the Shougang Park, a certain project primarily promotes improved large flat products. According to reports, since October, the number of visitors to the project has significantly increased. During this year's National Day holiday, the project achieved approximately 50 transactions. In the first and second weeks following the holiday, the average weekly transactions were around 15 units. "Especially during the National Day holiday, there were so many customers that even the sales consultants couldn't handle them all," said a person in charge of the project.
During the National Day holiday, Longhu · Guancui in the Zhongguancun Life Science Park area welcomed another peak in transactions after its opening. On October 1st alone, there were 10 customer transactions, and from October 1st to 6th, the average daily visitor count approached 100 groups, a sequential increase of over 50%. The average daily transactions exceeded 5 units, with a total of 32 units and 190 million yuan in transactions during the period.
The project's popularity did not wane after the holiday. Within a week, it continued to sell more than 120 million yuan, with an average of over 100 groups visiting on weekdays. "Customers who were previously hesitant quickly entered the market. During this period, multiple groups of customers signed contracts at the sales office until late at night, and currently, there is no significant increase in the sales floor prices," the person in charge of the project introduced.
Longhu Shunyi Yihujing, which has been the "triple crown king" (number of transactions, transaction area, transaction amount) in Shunyi for the first nine months of 2024, has almost sold out of its three-bedroom units in phases one and two. Currently, it is selling improved products with a living area of 165 square meters. During the "Eleven" period, it achieved an impressive performance of about 200 million yuan. In the first half of October, the project's visitor count increased by 180% compared to the same period in September, and the transaction volume exceeded 260%.
Indeed, this policy has activated market liquidity and released a significant portion of the demand for improved housing needs.
Another improved housing project also continued the sales heat during the "Eleven" period. The Beijing Chenyuan project, which achieved a super high performance of 6.15 billion yuan in its first opening on October 13th, added two buildings on October 19th. On that day, there were over 500 visitors, and the scene was very hot.
Homebuyers
The monthly payment reduction is significant, and the interest rates for existing housing loans were adjusted in batches on October 25th.
The new policy has indeed activated some home purchase demands and reduced the cost and threshold for buying a home. This year, many places have lowered the lower limit of the first mortgage loan interest rate multiple times, and the interest rate for the second mortgage has mostly entered the "3" era. However, this is a policy for new housing loans.
Existing housing loan customers who are currently repaying their loans also welcomed policy benefits at the end of September. On September 29th, the People's Bank of China issued an announcement to guide the batch adjustment of existing housing loan interest rates. The market interest rate pricing self-discipline mechanism also issued an initiative to batch adjust the interest rates for existing housing loans. Since then, customers with existing housing loans have also welcomed a reduction in interest rates.After adjustment, Beijing's first-home loan interest rates, which were higher than the Loan Prime Rate (LPR) minus 30 basis points (BP), have been uniformly adjusted to LPR minus 30BP. Calculated with the 5-year LPR at 3.85%, the adjusted rate is 3.55%.
For second-home loans in Beijing, interest rates that were higher than the minimum mortgage interest rate policy limit have been uniformly adjusted to the local minimum mortgage interest rate policy limit—inside the Fifth Ring Road, the minimum interest rate for second homes is LPR minus 5BP, and outside the Fifth Ring Road, it is LPR minus 25BP.
According to the latest news, starting from October 25th, individual existing mortgage interest rates will undergo batch adjustments. "It is expected that the majority of existing mortgages will be batched down-adjusted on October 25th, meaning that everyone can check the adjustment results through the designated channels of their lending banks on October 26th. Some small and medium-sized banks may take a bit longer to adjust, but overall, all adjustments will be completed by October 31st. The vast majority of borrowers will not need to visit bank branches. For those with floating-rate mortgages, there is no need to apply, as the bank system will adjust in batches, accounting for over 90% of existing mortgages; borrowers with fixed-rate mortgages can handle this through mobile banking, online banking, and other channels." said Tao Ling, Deputy Governor of the People's Bank of China, at the State Council Information Office press conference on October 17th.
In response, multiple banks including the Industrial and Commercial Bank of China and the Agricultural Bank of China have released detailed rules for adjusting existing mortgage interest rates. Many banks have clarified that the adjustment of existing mortgage interest rates will be directly and uniformly conducted by the bank's back-end system. Qualified mortgage customers do not need to take any action, nor do they need to visit bank branches, and the banks will not charge any fees.
If a customer's first mortgage is currently priced with a fixed interest rate, they can log in to mobile banking or online banking to apply for conversion to a floating interest rate pricing. After conversion, those who meet the conditions will also be within the scope of this batch adjustment of existing mortgage interest rates.
Ms. Li, who bought a house in Beijing in June 2023 and obtained a commercial housing loan, had a mortgage interest rate of 4.75% at the time, which was reduced to 4.5% in August 2024. After October 25th of this year, according to the new regulations, Ms. Li's mortgage interest rate will be reduced to 3.55%. "The first reduction was only 0.25 percentage points, and there was not a particularly significant 'less to pay' feeling in the monthly repayments. This time, for me, it was directly reduced by nearly 1 percentage point, which is a significant reduction in the monthly burden, saving more than 400 yuan per month," said Ms. Li.
In addition, on October 21st, the LPR saw its third reduction this year, and it was also the largest decrease. The People's Bank of China authorized the National Interbank Funding Center to announce that the Loan Prime Rate (LPR) on October 21, 2024, is: the 1-year LPR is 3.10%, and the 5-year LPR is 3.60%, both down by 0.25 percentage points from before.
Opinion
Policies work together to help the real estate market "stop falling and stabilize"
Chen Wenjing, Director of Policy Research at the China Index AcademyThe Central Political Bureau meeting held on September 26 set the tone for "promoting the stabilization and recovery of the real estate market," sending a strong signal to stabilize the real estate sector. Subsequently, first-tier cities introduced new policies for the real estate market one after another, and multiple departments held press conferences to introduce a "package" of incremental policy measures, which greatly boosted market confidence and improved residents' willingness to purchase homes.
On October 17, a joint press conference convened by the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, the Ministry of Natural Resources, the People's Bank of China, and the China Banking and Insurance Regulatory Commission highlighted the important role of stabilizing real estate in "stabilizing growth" and reflected a greater emphasis on policy coordination and consistency, further clarifying a series of "combination measures" to promote the stable and healthy development of the real estate market.
In addition, the press conference also covered multiple measures to improve the supply and demand relationship in the real estate market, among which the acquisition of existing housing and the revitalization of idle land are key points of focus. In the fourth quarter of this year, it is expected that the "package" of supporting policies for the real estate market will be accelerated. On the one hand, policies may revolve around the implementation of existing policies, such as implementing the cancellation of non-standard housing, optimizing tax and fee linkage policies, and continuing to reduce mortgage interest rates; local state-owned enterprises' policies for purchasing commercial housing are also expected to continue to unblock various bottlenecks, and the revitalization of idle land with more financial support is likely to be accelerated, with detailed supporting policy measures expected to gradually follow; the "white list" project loan distribution is expected to expand and intensify, continuing to play an important role in ensuring housing delivery and improving the financial environment for enterprises. On the other hand, more incremental policies are expected to be introduced quickly, with core cities fully exercising their regulatory autonomy and expected to continue to optimize restrictive policies, and more cities may adopt measures such as increasing home purchase subsidies and reducing transaction taxes and fees to promote demand release.
The direction of current real estate policy efforts has been clarified, and the key for the future will be to promote the implementation of various policies. From the market trend perspective, the "Silver October" started with "better-than-expected" performance, and the core city market showed a "stabilization" trend. At the press conference on October 17, the Ministry of Housing and Urban-Rural Development also stated that the market has begun to bottom out. It is expected that new policies will continue to take effect in the short term, and October's market sales data may show a significant increase. If policies continue to be implemented and the economy accelerates recovery in the fourth quarter, the core city market's volume and price may bottom out and stabilize, providing important support for the national market to bottom out.
Since September, reserve requirement ratio cuts and interest rate cuts have been implemented one after another, with the 5-year LPR cut three times this year, totaling a reduction of 60 basis points. The reduction of the 5-year LPR will further guide various regions to reduce mortgage interest rates, and the interest rates for housing provident fund loans may also be adjusted. The reduction of existing mortgage interest rates will be implemented, and most homebuyers may enjoy the benefits of this LPR reduction at the beginning of next year.
Overall, the reduction of the 5-year LPR will further reduce the cost of home purchases for buyers, which is conducive to stimulating the release of home purchase demand. In conjunction with the recent "combination measures" of policies implemented by the Ministry of Housing and Urban-Rural Development, the People's Bank of China, the Ministry of Finance, and other departments, it is expected to form a greater synergy to help the real estate market "stabilize and recover."
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