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Stock Market Cools, Boost for Housing Market?
After the three trading days following the National Day holiday, and after being baptized by the volatile market, China's domestic stock market finally showed a clear trend of cooling down on October 10th. Here is a post-market summary for everyone:
The Shanghai Composite Index opened up by 0.58%, closed at 3,301.93 points, with a gain of 43.07 points, up by 1.32%;
The Shenzhen Component Index opened slightly up by 0.49%, closed at 10,471.08 points, with a loss of 86.73 points, down by 0.82%;
The ChiNext Index opened slightly up by 0.49%, closed at 2,212.91 points, with a loss of 67.19 points, down by 2.95%;
The three markets traded a total of 2,142.99 billion yuan. Among them, the Shanghai market traded 947.789 billion yuan, and the Shenzhen market traded 1,195.201 billion yuan.
In the Shenzhen market, the ChiNext market traded 633.252 billion yuan, and the SME board traded 13.4627 billion yuan.
The total turnover of the three markets was reduced by 796.832 billion yuan from yesterday's 2,939.822 billion yuan, a reduction of 27.10%.
The turnover of the three markets broke through one trillion yuan, with active trading volume and a hot market sentiment.
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A total of 2,984 individual stocks in the three markets rose, 115 were flat, and 2,218 fell.
With reduced volume and slight increase, the market has shown a clear cooling trend in terms of trading, market trends, and public opinion heat.This account has already published relevant analytical content to analyze and discuss the causal logic behind such a slow bull market pattern, so I won't elaborate further here.
In this article, let's talk about the somewhat awkward and desolate real estate market following the outbreak of the domestic financial market trend on September 24th.
As the Chinese stock market shows a clear cooling down and a return to rationality, there are also new positive developments on the real estate front.
On October 10th, several banks announced: the existing housing loan interest rates will be uniformly reduced to LPR-30BP.
Has this round of new economic stimulus led by the state finally reached the real estate market?
This article will be based on a detailed combing of the latest trends of several banks officially announcing the reduction of existing housing loan interest rates, combined with the current domestic economic reality, starting from the perspective of respecting common sense and laws, to deeply explore the causal logic and possible effects behind this round of reduction in existing housing loan interest rates. It will also conduct an in-depth, attitude-laden, and evidence-based special discussion and analysis on several possible changes and trends in China's real estate market and housing prices.
1
Several banks issued announcements to uniformly reduce the interest rates of existing housing loans, what exactly is this about?
On October 10th, several banks including Industrial and Commercial Bank of China, Bank of Communications, China Merchants Bank, Shanghai Pudong Development Bank, China Zheshang Bank, and Industrial Bank issued common Q&A on the adjustment of existing housing loan interest rates. Those with current housing loan interest rates higher than LPR-30BP will be uniformly adjusted to LPR-30BP.
Both first and second homes will be adjusted. ICBC has determined to make the uniform adjustment on October 25th, and other banks will complete the adjustment before October 31st. Those with their own housing loan interest rates lower than LPR-30BP will not participate in this adjustment.Image source: XIN number
In fact, the reduction of the existing housing loan interest rates in this round is a planned, regular, and rhythmic policy benefit promotion.
On September 24, the Governor of the People's Bank of China, Pan Gongsheng, stated that the reduction of existing housing loan interest rates would guide commercial banks to lower the interest rates of existing housing loans to a level close to newly issued loans, with an expected average decrease of about 0.5 percentage points.
On September 29, the People's Bank of China issued a notice and guided the market interest rate pricing self-discipline mechanism to issue an initiative: commercial banks should, in principle, implement a batch adjustment of the interest rates of existing housing loans (including first, second, and subsequent sets) by October 31, 2024.
By October 10, several commercial banks indicated that they would announce specific operational guidelines and related matters through official websites, WeChat public accounts, outlets, and other channels on October 12, and complete the batch adjustment of existing housing loan interest rates by October 31.
Overall, this is a "pre-announcement, follow-up promotion" national policy will come true.
The matter is just such a matter, with evidence and clear at a glance.
2
Impact analysis: What impact will the reduction of existing housing loan interest rates have on different economic participants?
It is worth noting that before the reduction of existing housing loan interest rates in this round, a new round of reduction in residential deposit interest rates has actually been quietly completed.On October 8th, Baishan Hunjiang Hengtai Rural Bank announced that starting from today, it will adjust the RMB deposit listed interest rates, with the largest decrease being for the 2-year fixed deposit interest rate, by 15 basis points.
Since late September, numerous small and medium-sized banks in various regions such as Shanxi, Xinjiang, Guangxi, and Guizhou have intensively issued announcements declaring a reduction in deposit interest rates.
The reduction involves a wide range of deposit types, with the decrease ranging from 10 to 110 basis points.
The logic behind this is actually quite straightforward: the downward trend in existing mortgage interest rates and the Loan Prime Rate (LPR) will exert pressure on banks' net interest margins, necessitating a reduction in the cost of liabilities to achieve balance, and a "rate cut" for deposits is expected to become a trend.
In the past six months, many banks have accelerated the frequency of reducing deposit interest rates. The rate cuts by the aforementioned small and medium-sized banks are still following the rate cut trend previously initiated by state-owned large banks.
After state-owned large banks and joint-stock banks adjust, some small and medium-sized banks timely follow up and adjust related interest rates.
In fact, regarding the reduction of existing mortgage interest rates, it is essentially a bank institution making concessions and offering benefits to the mortgage group. This account has also written many articles analyzing and discussing the intricacies and interests involved.
Overall, from the perspective of economic reality, the group that feels the best is the current mortgage slaves, especially those who bought homes in the past five years. To some extent, they can experience relief in terms of monthly mortgage payments.
Trend analysis: Looking at the country's guidance for banks to reduce existing mortgage interest rates, what does this imply for future housing prices?In fact, from a profit perspective, banks are certainly unwilling to let the state guide them to voluntarily give up profits and take actions to lower the interest rates on existing mortgages.
It goes against economic logic and the principle of interest to spit out the meat that has been eaten, right?
However, what the state sees is completely different from what banks see.
In the current economic pressure, many people are taking two types of actions.
One action is: repaying loans in advance.
According to statistics,
In the first half of 2024, among 19 banks, the personal housing loan balances of 14 banks decreased.
Among them, the personal housing loan balances of the six major state-owned banks, including Industrial and Commercial Bank, Agricultural Bank, China Construction Bank, and Bank of Communications, all decreased, with some decreasing by more than 100 billion, while only the Postal Savings Bank of China saw a slight increase in loan balances.
From the trend,
The action of repaying loans in advance is getting faster and faster!In the first half of 2024, the combined personal housing loans of the six state-owned banks decreased by 325.471 billion yuan.
In 2023, the combined personal housing loans of the six state-owned banks decreased by 556.857 billion yuan.
The loan repayment volume in the first half of this year is close to 60% of last year's annual repayment volume.
The speed of loan repayment has directly increased by about 16%.
Looking at the national data,
As of the first half of this year, the national personal housing loan balance is 37.79 trillion yuan, a year-on-year decrease of 2.1%,
Since the second quarter of 2023, the personal housing loan balance has continued to decline for five consecutive quarters.
The detailed situation is as follows:
In the second quarter of 2023, it decreased by 0.7% year-on-year.
In the third quarter of 2023, it decreased by 1.2% year-on-year.In the fourth quarter of 2023, there was a year-over-year decrease of 1.6%.
In the first quarter of 2024, there was a year-over-year decrease of 1.9%.
In the second quarter of 2024, there was a year-over-year decrease of 2.1%.
At the same time, in April of this year, the early repayment rate index reached a historical high of 37%.
The number of people repaying their loans early is increasing, and the amount of early repayments is also increasing.
Looking at another action: mortgage default.
In the first half of this year, the non-performing loan ratio for personal housing loans at large and medium-sized banks almost universally increased.
Among them, the non-performing loan ratios for housing loans at ICBC, CCB, ABC, BOC, and BOCOM increased by 0.16, 0.12, 0.03, 0.07, and 0.11 percentage points, respectively.
After mortgage default, it's time to go through the foreclosure process.
Therefore, we can see that the foreclosure market is becoming increasingly active.In the first half of 2024, the scale of judicial auction housing listings across the country reached 202,000 units, a year-on-year increase of 12%.
Among them, the effective listing volume was 166,000 units, with 28,000 units sold, an average transaction rate of 17%, a year-on-year decrease of 7 percentage points.
As a result, the non-performing loan rate for housing loans naturally increased.
Mortgage defaults can generally be divided into two categories:
One category is those who default passively.
For example, those who previously leveraged heavily to buy houses, and as the market changes, their cash flow can no longer sustain it; for example, small and medium business owners, when their businesses are not doing well, they can no longer afford the mortgage payments.
There is also a category of people who default actively.
Those landlords whose down payments have been completely wiped out, leaving them with nothing but loans.
Thus, they begin to actively choose to default on their mortgages.
Of course, banks are also actively easing the pressure on such people, willing to extend their mortgage repayments in exchange for more time.Under the current trend, the number of people who default on their loans is increasing.
Banks are still manipulating the abacus, but the country has already sounded the alarm for financial risks: since 2024, the wave of early loan repayments and defaults has become more intense.
The person involved is confused, but the onlooker is clear, so even if the banks are subjectively unwilling, the situation is stronger than the person.
This is not a discovery of the bank's conscience, but if they continue to hold on to the paper profits, the crisis and risks will follow like a shadow.
From the perspective of the country's consideration of the domestic economic environment, especially the risks and actual situations in the real estate economic field, as well as the corresponding strategies, the core attitude towards the domestic real estate market at present is still a "time for space", and the first thought is to maintain stability and safety.
Therefore, there is the latest "stop falling and stabilize" tone of the high-level meeting.
Inheriting from the same source, echoing each other, combining reality and expression.
Starting from this essential analysis, in the second half of 2024, the domestic housing prices, especially the prices of new houses, are expected to slow down.
But more importantly, just lowering the interest rate of the existing mortgage loans cannot change and reverse the trend of further downward housing prices.
The clearance of this round of the industry and market is still an unpredictable distance from the real bottom.
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