Property stocks in Hong Kong surged on Tuesday following significant announcements by Chinese financial regulators regarding measures aimed at easing the financial strain on households and bolstering the real estate sector. The People’s Bank of China (PBOC) Governor Pan Gongsheng revealed key initiatives during a press conference, including a reduction in mortgage interest rates and a lower down-payment requirement for second homes.
The PBOC’s new policy will lower the interest rates on existing mortgages by 0.5 percentage points and reduce the down-payment ratio for second homes to 15% from the previous 25%. This marks the first time that down payment requirements for first and second homes have been aligned. The central bank expects this move to ease household mortgage payments by approximately 150 billion yuan ($21.25 billion) annually.
Following the announcement, the Hang Seng Mainland Properties Index rose as much as 5%, and real estate developers like China Resources Land, Longfor Group Holdings, and China Overseas Land & Investment experienced significant gains of 4.49%, 4.57%, and 5.41%, respectively.
China’s policymakers have been increasing efforts to support the property market, which has struggled with declining investments and falling demand. However, past measures have had limited impact, with property-related investments falling by more than 10% in the first eight months of this year compared to the previous year.
Alongside the mortgage relief measures, Pan Gongsheng also announced a 50 basis point cut to the reserve requirement ratio (RRR), allowing commercial banks more liquidity to support lending. This move is part of broader efforts to stabilize the property sector and reduce household financial burdens.
While the mortgage rate cuts may alleviate financial pressure on existing homeowners, analysts are cautious about the long-term impact on the housing market. William Wu, an analyst at Daiwa Capital Markets, noted that the cuts may not stimulate new demand for homes and could slow down further reductions in loan prime rates. Bruce Pang, chief economist at JLL, emphasized the need for additional measures to support developers and stimulate property investment and construction activities.
There are also discussions underway about allowing homeowners to renegotiate their mortgage terms with lenders before January next year, potentially offering further relief to struggling households. This could include the option for homeowners to refinance with different banks, a practice that has not been allowed for several years.
