Shanghai, China – Chinese property stocks surged on Tuesday as top financial regulators in China announced a series of monetary easing measures aimed at providing relief to millions of households and stimulating a recovery in the real estate market. People’s Bank of China Gov. Pan Gongsheng revealed during a press conference that Beijing would be implementing measures such as reducing interest rates on existing individual mortgages by an average of 0.5 percentage points. Additionally, the down-payment ratio for second home purchases would be lowered to 15% from 25%, which represents the first unified down payment level for both first and second homes.
The Hang Seng Mainland Properties Index saw a significant jump of up to 5% following the announcement, with shares of real estate developers in Hong Kong such as China Resources Land, Longfor Group Holdings, and China Overseas Land & Investment experiencing notable gains on the Hang Seng index. These measures are part of a broader effort by Chinese policymakers to alleviate financial burdens on households and stabilize the struggling real estate sector, which has seen a decline in property-related investment of more than 10% in the first eight months of the year.
In addition to the interest rate reductions and down payment adjustments, the central bank also plans to provide guidance to commercial banks on improving pricing mechanisms for mortgage loans. The reserve requirement ratio (RRR) will also be reduced by 50 basis points. While these measures are expected to have a positive impact, some analysts caution that rate cuts on existing loans may not necessarily spur new housing demand and could potentially slow down the pace of further loan prime rate reductions by the PBOC.
Bruce Pang, chief economist for Greater China at JLL, emphasized the importance of launching supportive measures swiftly to boost property investment and construction activities. It is anticipated that the housing market may take some time to stabilize despite these efforts, as authorities continue to explore options such as allowing homeowners to renegotiate terms with lenders and refinance with different banks.
The overall objective of these monetary easing measures is to provide relief to households, support the real estate market, and stimulate economic growth in the wake of ongoing challenges. As China navigates through these economic uncertainties, policymakers will be closely monitoring the impacts of these initiatives to ensure a sustainable and balanced recovery in the housing sector.