A Chinese flag is seen in the Lujiazui financial district of Pudong in Shanghai, China, on September 18, 2023.
Raul Arellano | Bloomberg | Getty Images
Chinese property shares rose on Tuesday after major financial regulators pledged a raft of monetary easing measures to provide some relief to millions of households and bolster a recovery in the property market.
At a high-level press conference Tuesday morning, People's Bank of China Governor Pan Gongsheng announced that Beijing will cut interest rates on existing individual mortgages by 0.5 percentage points, and reduce the down payment ratio for second-home purchases to 15% from 25%.
This is the first time that down payment levels for first and second homes have been unified, and the People's Bank of China expects the lower rate to cut household mortgage interest payments by 150 billion yuan ($21.25 billion) a year.
The mainland's Hang Seng property index rose about 5% when Hong Kong markets opened shortly after the announcement.
Shares of real estate development companies listed on the Hong Kong Stock Exchange such as: Land resources in China, Longfor Holding Group and Chinese land and overseas investment Technology stocks were among the biggest movers on the Hang Seng Index, rising 4.49%, 4.57% and 5.41%, respectively.
Chinese policymakers have been ramping up support to ease the financial burden on households and support the struggling real estate sector.
Previous measures have failed to stimulate a real recovery, with real estate-related investment down more than 10% in the first eight months of this year, compared to last year.
The central bank will also provide guidance to commercial banks to improve pricing mechanisms for mortgage loans, Pan said at the press conference, as he also announced that China will cut the amount of cash banks need to hold, known as the reserve requirement ratio or RRR, by 50 basis points.
“The impact of the new measures is likely to be limited, as lowering interest rates on existing loans will not stimulate demand for new homes and may slow the pace of the People’s Bank of China’s policy rate cuts on loans,” William Wu, an analyst at Daiwa Capital Markets, said in an email.
Bruce Pang, chief economist and head of research for Greater China at JLL Investment Management, predicted that the housing market will take some time to bottom out.
“It is necessary and urgent to launch supportive measures on all fronts as soon as possible,” Pang said, but authorities will also need to provide “effective and efficient support to developers to boost real estate investment and construction activities.”
Last month, Bloomberg News reported, citing people familiar with the matter, that China is considering a plan to allow homeowners to renegotiate terms with existing lenders before January next year. Homeowners may also be allowed to refinance with a different bank for the first time in years, the agency said.
