China has recently introduced an array of policies to prop up the real estate market. On August 30, the policy that "treats the second mortgage as the first one if the first mortgage is paid off" was implemented in Guangzhou and Shenzhen. On September 1, Beijing and Shanghai also followed suit and implemented the similar policy. Thus, the four first-tier cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, have all implemented the new policy.
The implementation of the policy directly reduces the down payment as a percentage of the total purchase price and mortgage interest rates, which has helped stimulate housing demand. Taking first-tier cities as an example, after the new policy was implemented, the down payment percentage for residential properties can be reduced by 15 percentage points to 40 percentage points, and the mortgage interest rate for residential properties can be reduced by 30-70 basis points, which is conducive to the positive release of demand for improvement-type homebuyers.
After the policy was fully implemented, what changes have occurred in the real estate market in the first-tier cities? Looking at the online signing data of new and second-hand houses, there has been no obvious rebound in transactions in the week following the implementation of the new policy, and transactions have remained at a low level. However, from the market feedback, the on-site house viewing heat in first-tier cities has significantly increased, and the sales offices have seen a long-lost hot state.
Currently, more and more cities are following the "Recognize House, Not Recognize Loan" policy. How much impact does the new policy have on the market? How much can homebuyers save on down payments and loan amounts? This issue of TiPost will analyze these questions from a data perspective.
25 municipal governments follow the new policy
After the Ministry of Housing and Urban-Rural Development expressed support for the "Recognize Houses, Not Loans" policy on July 24th, Zhengzhou released "15 New Policies for Zhengzhou's Real Estate Market" on August 3rd, becoming the first city to explicitly support the policy proposed by the Ministry of Housing and Urban-Rural Development.
On August 25th, the Ministry of Housing and Urban-Rural Development, the People's Bank of China, and the China Banking and Insurance Regulatory Commission jointly issued a document to promote the implementation of the "Recognize Houses, Not Loans" policy for first-time homebuyers, and included it as a policy tool in the "One City, One Policy" toolbox. The "Recognize Houses, Not Loans" policy refers to when a resident household (including the borrower, spouse, and minor children) applies for a loan to purchase a residential property, regardless of whether they have previously used a loan to purchase a property, banks and financial institutions will treat it as a first-time home purchase and apply housing credit policies accordingly, as long as the household does not own a fully-owned residential property in the city.
Subsequently, from August 30th to September 5th, within a span of 6 days, according to statistics from TiPost, 25 cities including Guangzhou, Shenzhen, Shanghai, Beijing, Xiamen, Chengdu, Chongqing, Hangzhou, and Dongguan have successively announced the implementation of the "Recognize Houses, Not Loans" policy. Among them, Anhui Province has issued a document to implement the new policy across the entire province.
Data shows that after the implementation of the new policy, the online demand for housing quickly rebounded. From September 1st to 3rd, the demand for new homes in cities that implemented the "Recognize Houses, Not Loans" policy increased by 19% compared to August, and the demand for second-hand homes increased by 20%. Among the demand for new homes, Beijing had the highest growth rate, reaching 38%, followed by Changsha with a growth rate of 33%. Among the demand for second-hand homes, Beijing also had the highest growth rate, with Shanghai's demand for second-hand homes at 34%, second only to Beijing. Compared to August, the overall demand for housing in first-tier cities increased by 30%.
First-tier cities are the vane of national policies and play a demonstrative role in the comprehensive implementation of the "recognize houses, not loans" policy in other cities. In the first weekend after the new policy was implemented, the market effects of first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen have emerged. The number of customers visiting houses in first-tier cities has increased significantly, and many real estate-related companies have stated that there are more than 30% more visitors and buyers after the new policy was introduced, and the sales offices have become very active. According to data from Lianjia Research Institute in Shanghai, the transaction volume of Lianjia stores increased by nearly 70% compared to regular weekends after the new policy was implemented. From market feedback, the real estate market in first-tier cities is showing signs of recovery.
However, in terms of transaction volume, there has not been a significant rebound in the transaction volume of new and second-hand houses in the week after the new policy was implemented. Data shows that in the week after the implementation of the new policy in Beijing, Shanghai, and Shenzhen (August 30th to September 5th), a total of 4,645 new houses and 6,812 second-hand houses were sold. However, compared with the same period last week (August 23rd to August 29th), the transaction volume remains low and the scale of transactions has further decreased, but there is a trend of gradual narrowing. In terms of the types of houses signed online, the number of transactions for second-hand houses is much higher than that of new houses.
The increase in the number of price-increasing properties in first-tier cities indicates an active real estate market and a trend of increasing confidence among buyers. In the week following the implementation of the new policy (August 30th to September 5th), there was a significant increase in the number of price-increasing properties in first-tier cities, with over 1,000 units per day in Beijing, Shanghai, Guangzhou, and Shenzhen from September 1st to September 5th. In specific cities, Beijing saw a more significant increase in the number of price-increasing properties, with 1,048 units on the first day of the new policy (September 2nd), a 424% increase compared to the same period last week (August 26th); Shanghai also reached a new high in the number of price-increasing properties on the first day of the new policy, with nearly 680 units, a 186.9% increase compared to the same period last week; Shenzhen also reached a new high in the number of price-increasing properties on the first day of the new policy. It can be seen that after the implementation of the "buy a house, don't recognize the loan" policy, the real estate market in first-tier cities has become lively.
Lower access threshold for buyers, maximum down payment reduced by 40%, loan-to-value ratio reduced by 130 basis points
The "buy a house, don't recognize the loan" policy means that even if buyers have previously used loans to purchase properties, as long as they currently do not own any properties, their new purchase will still be considered as the purchase of a "first home". This can significantly reduce the down payment ratio and loan interest rate for buyers. So, how much cost can be reduced specifically for homebuyers?
From the perspective of reducing the down payment, according to statistics from TiPost Focus, in some cities where the "buy a house, don't recognize the loan" policy has been implemented, the down payment ratio for buyers can be reduced by 5% to 40% for ordinary residential properties. In specific cities, the down payment ratios in first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen vary greatly. In Shenzhen, the down payment ratio can be reduced by 40%, from 70% to 30%, which greatly enhances the confidence of buyers. This has a significant impact on people who have had loan records in other cities, do not own properties locally, and engage in "sell one and buy one" transactions.
Similarly, when buying a house changes from a second house to a first house, the mortgage interest rate will also decrease. According to the statistics of TiPost·TiDegree News, in some cities where the "recognize the house, not the loan" policy has been implemented, the loan interest rate can be reduced by 30-130 basis points. Among the 10 cities we surveyed, Xiamen has the largest difference in loan interest rates, with a decrease of 130 basis points from 5% to 3.7% after implementing the "recognize the house, not the loan" policy. Among the four first-tier cities, Shanghai has the largest difference in loan interest rates, with a decrease of 70 basis points from 5.25% to 4.55%. Therefore, the combination of a decrease in down payment ratio and a decrease in mortgage interest rates will promote the replacement demand of improvement-type home buyers.