Chinese officials have released a new round of signals to boost the property market intensively this week. News that real estate companies will receive additional financial support is also increasing. A series of good news has driven Chinese real estate stocks to rise for four consecutive days.
Starting from Thursday (November 23), the first-tier city of Shenzhen will lower the minimum down payment ratio for buying a second home from 70% for ordinary housing and 80% for non-ordinary housing to 40%.
The authorities have also adjusted the standards for identifying ordinary housing, eliminating the price condition that “the actual total transaction price is less than 7.5 million yuan (RMB, the same below, 1.43 million Singapore dollars)”. This means that residences with a total price of more than 7.5 million yuan, if they meet other conditions such as an area of less than 144 square meters, are also regarded as ordinary residences and do not need to be levied on what is commonly known as the “mansion tax.”
Zhang Xiaoduan, deputy director of the Cushman & Wakefield Research Institute, analyzed in an interview with Lianhe Zaobao that Shenzhen’s current round of new policies is a breakthrough and substantial loose policy among first-tier cities, and it has a certain stimulating effect on improved demand.
Zhang Xiaoduan pointed out that compared with the previous “recognize the house but not the loan”, lowering the down payment ratio for the second home is a greater benefit for improvement buyers who want to keep the first home. After relaxing the price threshold of 7.5 million yuan, more families can enjoy tax benefits. “This round of policy adjustments can be said to be targeted at the Shenzhen market and is expected to effectively improve buyers’ expectations.”
On the other hand, the website of the Shanghai headquarters of the Bank of China disclosed on Thursday that the Shanghai headquarters of the central bank, the Shanghai Supervision Bureau of the State Administration of Financial Supervision, the Shanghai Securities Regulatory Bureau and other institutions jointly held a symposium on financial institutions on the 21st, requiring equal treatment to meet the reasonable financing needs of real estate companies with different ownerships. The real estate companies that operate do not hesitate to lend, withdraw loans, or cut off loans.
This is consistent with the statement at a symposium on financial institutions held by the central financial regulatory authorities last Friday (17th). The National People’s Congress Standing Committee’s response to the central bank’s financial work report published on Wednesday (22nd) also recommended supporting the reasonable financing needs of real estate companies, reducing their credit default risks, and alleviating residents’ panic expectations about purchasing off-plan properties.
Yan Yuejin, research director of the real estate consultancy Yiju Research Institute, pointed out that local financial departments have begun to take active actions, and it is expected that banks will start to screen high-quality real estate companies. Compared with the over-concentration of operations of a single real estate company by some banks after the introduction of the “16 Financial Regulations” last year, now some private and small and medium-sized real estate companies can also receive better financial support.
In addition to the above-mentioned official measures, market rumors about the authorities increasing support for real estate companies are also increasing. Bloomberg quoted people familiar with the matter as saying on Thursday that regulatory authorities are drafting a plan to allow commercial banks to provide short-term working capital loans without collateral to some qualified real estate companies to ease the liquidity crisis of real estate companies.
Previous market news said that regulatory authorities are drafting a white list of developers eligible to obtain financing. Those selected for the white list include Vanke, Country Garden, Sino-Ocean Group, CIFI Holdings and other real estate companies.
Boosted by a series of good news, the Hang Seng Mainland China Real Estate Index, which tracks Chinese real estate companies, closed up 6.4% on Thursday, and has risen 11.4% this week. CIFI Holdings’ share price surged 48.15%, Sino-Ocean Group climbed 31.11%, and Country Garden rose 23.53% to HK$1.05 (S$0.18), getting rid of the title of “penny stock” (stocks below HK$1) for the first time in two months.
Nomura analyst Dong Jizhou predicted in a report that real estate stocks may continue to rise in the short term, driven by relevant reports. However, until the sales situation in the property market becomes clearer, it is expected that the stock prices of real estate companies will be difficult to achieve sustained outperformance. Another major question is whether commercial banks have enough incentive to expand their financing exposure to defaulted housing companies.
Official data released last week showed that China’s residential sales fell by 3.7% year-on-year in the first 10 months of this year, a further expansion from the 3.2% decline in the previous nine months; the year-on-year decline in real estate development investment also expanded from 9.1% to 9.3%.
Zhang Xiaoduan said that the current difficulties faced by real estate companies are caused by multiple factors such as industry adjustment and the macroeconomic environment. The declining property market has in turn dragged down overall investment and economic recovery. In order to break this cycle, I believe that the policy side will continue to make efforts. “Whether the ‘white list’ is true or false, these measures are beneficial in terms of ensuring the financing needs of real estate companies and boosting industry confidence.”
2023-11-23 15:30:00
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