The Ministry of Housing and Construction stated that it first proposed “reducing the down payment ratio for the first package.” Analysts believe it will help release improvement demand, and that there will be more space for high-energy cities in the future.

On July 27, 2023, Minister of Housing and Urban-Rural Development Ni Hong said at an enterprise symposium held recently that it is necessary to continue to consolidate the steady upward trend in the real estate market and strongly support the demand for rigid and improved housing.Further implement policies and measures such as reducing the down payment ratio and loan interest rates for the purchase of the first home, tax relief for the purchase of improved housing, and “no need to sign up for a loan” for personal housing loans;Continue to do a good job of securing buildings, speed up project construction and delivery, and ensure that the legitimate rights and interests of the masses are protected.

Following the Politburo meeting's proposal to “adjust and optimize the real estate policy in due course,” the Ministry of Housing and Construction made a statement on the specific direction and content of the policy adjustments.

In response, Ping An Securities believes thatThis statement is the first time that the Ministry of Housing and Construction has proposed a reduction in the down payment ratio for the first housing unit, exceeding market expectations:

According to the 2016 regulations of the central bank, in principle, the minimum down payment ratio for commercial personal housing loans for non-restricted urban households purchasing ordinary housing is 25%, which can fluctuate 5 percentage points from place to place; for cities implementing “purchase restriction” measures, the personal housing loan policy is implemented in accordance with the original regulations. Currently, most non-purchase restricted cities have implemented a minimum down payment ratio of 20% for the first unit, but for core Tier 1 and 2 cities, the minimum down payment ratio for the first home is still not less than 30%.

This time, the Ministry of Housing and Construction proposed reducing the down payment ratio for the purchase of the first housing unit, exceeding market expectations, which is beneficial to reducing the cost of buying a home for buyers. If implemented later, it will further benefit core cities with high total prices and high purchase thresholds.

At the same time, the conference emphasized a further reduction in interest rates on first-tier loans. According to Seashell statistics, the average interest rate for first home loans in Baicheng in July was 3.90%. Among them, interest rates on first-tier, second-tier, third-tier, and fourth-tier cities were 4.5%, 3.88%, and 3.88%, respectively.First-tier cities with relatively higher mortgage interest rates may benefit more.

Regarding the emphasis on implementing the “buy a house, not a loan” for personal housing loans, Ping An Securities believes that it is conducive to improving the release of demand:

Currently, some core cities are still implementing “housing and loan” credit policies to increase housing exchange costs for improved needs. This conference clearly stated the implementation of “no need to buy a loan” for personal housing loans. It is expected that loan restriction policies in core cities will be optimized in the future, which will help to drastically lower the threshold for buying homes with improved demand and revitalize the entire real estate trading market. At the same time, the conference emphasized the implementation of improved housing exchange tax relief, and it is expected that future policy support will be ushered in in the future in terms of tax on transactions such as value-added tax and deed tax.

Du Haomin, an analyst at Guojin Securities, believes that policies support housing demand, and there is more room for relaxation in high-energy cities in the future:

Since March 2022, many cities have started easing support on the demand side of real estate.The four-limit policy for low-energy cities should have basically been exhausted. It is expected that purchase restrictions and sales restrictions in high-energy remote suburban areas will gradually be implemented in the future.

In terms of mortgage interest rates, according to data from the Shell Research Institute, the average interest rate for first home loans in 100 cities in July was 3.9%, down 45 bps from the previous year; the average interest rate for second home loans was 4.81%, down 25 bps from the previous year; by city energy level, interest rates for first and second home loans in first-tier cities were 4.50% and 5.03% respectively; interest rates on first and second home loans in second-tier cities were 3.88% and 4.80% respectively. There is still room for interest rates on first home loans in high-energy cities to fall by the lower limit.

Looking at the down payment ratio, third- and fourth-tier cities, including some second-tier cities, have already implemented a down payment ratio of 20% for the first home and 30% for the second home, while first-tier and some second-tier cities still have a high down payment ratio (especially for the second suite). Therefore, in the future, high-energy cities are expected to gradually implement “house subscription without loan” to support the release of improved demand.

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