The Zhitong Finance App learned that CITIC Securities released a research report saying that it is expected that the real estate demand-side policy may aim to further reduce residents' home purchase thresholds and purchase costs, which is expected to stimulate the release of potential residential demand and underpin the continued decline in the real estate market. It is expected that policy coordination is expected to stabilize housing prices in the second quarter of 2024. Optimistic about development companies that are more suited to boutique development and focus on core cities. They are also optimistic about service platforms that have an advantage in the field of stock housing transactions and home improvement.

▍ The main views of CITIC Securities are as follows:

The excessive cost of buying a home is a core factor limiting current demand in the real estate market.

The current real estate market is certainly facing many problems, but the core factor limiting demand is still the high cost of buying a home, especially the high interest rate on mortgage loans. According to the monetary policy implementation report of the People's Bank of China for the fourth quarter of 2023, by the end of 2023, the weighted average interest rate for personal housing loans in China was 3.97%, down 166 bps from the high since 2020, reaching a new low since 2009. However, considering that the actual mortgage interest rate (mortgage interest rate - CPI) is in the 76% fraction since 2009, the actual cost of buying a home is still high.

According to Shell Research Institute data, in January 2024, the average first-tier mortgage interest rate in 50 cities was 3.88%, of which 4.13% in first-tier cities. Compared with the highest point since 2020, the average first-tier mortgage interest rate in 50 cities dropped by 179 bps, but first-tier cities only dropped 116 bps. It is expected that first-tier cities will still have a lot of room to decline in mortgage interest rates.

The minimum interest rate limit for mortgage loans may be further liberalized.

Compared with the weighted average interest rate of RMB loans from financial institutions, China's mortgage interest rate is still high. According to the central bank, the mortgage interest rate at the end of 2023 was 14 bps higher than the RMB average loan interest rate, but in 2009-2020, the average mortgage interest rate was 49 bps lower than the RMB average loan interest rate, and up to 91 bps lower. In other words, even without considering long-term LPR cuts, mortgage interest rates should have more room to expand LPR discounts.

Earlier, the central bank issued a “long-term mechanism for dynamic adjustment of interest rate policies for the issuance of new housing loans for the first housing unit” to maintain, lower, or abolish the lower interest rate limit for commercial personal housing loans for the first housing unit in stages for cities where sales prices of newly built commercial residential homes have declined for 3 consecutive months month-on-month and year-on-year. It is expected that the central bank's restrictions on the lower limit of mortgage interest rates (including the first set and the second set) may be further relaxed to push the mortgage interest rate down further.

Policy synergy is expected to stabilize housing prices in the second quarter of 2024.

On the demand side, it is expected that purchase restriction policies in core cities, including first-tier cities, may be further relaxed until completely withdrawn, and mortgage interest rates may decline further, driven by lower LPR and expanded discounts. On the supply side, policies such as the financing white list and relaxation of the use of operating property loans are also beneficial to marginally easing the financing pressure on housing enterprises, promoting property security, and improving the confidence of all players in the real estate industry chain, including buyers. It is expected that under the combined impetus of various policies, housing prices may end the rapid downward trend in the second quarter of 2024 and enter a relatively stable platform period.

Risk warning:

Policies fall short of expectations, and there is a risk that real estate sentiment will weaken further; there is a risk that companies will experience a peak in debt repayment in March and April, and capital flows will be tight beyond expectations; there is a risk that the profitability of some companies will continue to decline, and their performance will fall far short of expectations.