Chinese real estate stocks rose after major cities eased home buying restrictions

Shares of Chinese property developers rallied on Monday after major cities in mainland China announced easing measures to boost homebuyer sentiment, following a round of policy stimulus. Central bank hype.

the Guangzhou City Government said in an announcement on Sunday that all restrictions on home purchases will be lifted, effective Monday. Previously, migrant families had to pay taxes or social insurance for at least six months to buy up to two houses, while single people were limited to one apartment.

the The Shanghai government also lowered it The prescribed tax payment deadline is one year from three years. The city also lowered down payment rates for first homes to about 15%, while for second homes to about 25%, higher than the national average of 15%. The rules take effect starting Tuesday, according to the announcement late Sunday.

The Shenzhen government also relaxed The purchase restriction – which already limits local families to two homes and single individuals to one – allows buyers to purchase an additional unit in certain boroughs. According to the statement, migrant families with at least two children can now buy two houses, instead of one as before.

The Hang Seng Mainland Real Estate Index rose 8.36% on Monday morning, extending last week’s gain of more than 30%.

Hong Kong-listed shares of real estate developers such as Longfor Holdings Group, Hang Lung Properties, China’s land resources are some of the leading stocks in the Hang Seng index, up 19.1%, 10.95% and 3.58% respectively. China Land & Overseas Investment And China Vanke increased by 5.06% and 12.89% respectively.

Mainland China’s CSI 300 index rose 6% on Monday, after the index notched its best week in nearly 16 years on Friday. The CSI 300 Real Estate Index rose more than 7%.

Allen Feng, deputy director of Rhodium Group, said the easing of sales restrictions could help lift real estate sales in first-tier cities – such as Beijing, Shanghai and Guangzhou – to high levels. than other cities. other cities before.

The view is shared by Gary Ng, APAC economist at Natixis, who thinks the impact will be more limited in smaller cities “due to elevated inventory levels”. They are more likely to lead to some “stabilization” than complete change, Ng said.

The easing measures follow a call by the central government last week prevent asset decline last week. According to the content of the high-level meeting chaired by Chinese President Xi Jinping, authorities “must make efforts to prevent the decline of the real estate market and promote a stable recovery.”

People’s Bank of China also reduce interest rates for personal mortgages now averaging 0.5 percentage points and reducing the average down payment rate for second home purchases to 15% from 25%.

Real estate once contributed more than a quarter of China’s GDP but entered a multi-year recession after Beijing cracked down on the sector’s high debt levels in 2020.

Chinese policymakers are stepping up support to reduce the financial burden on households and revive the struggling real estate sector. But previous measures have not led to any meaningful change.

Erica Tay, director of macro research at Maybank Investment Banking Group, said China may “need to accelerate efforts to complete stalled or abandoned construction projects” to bolster consumer confidence. potential homebuyers and restore demand. Only 4% of the floor area under construction this year has been completed.

Nomura analysts led by Jizhou Dong said in a note on September 26 that “fast tracking of fiscal policies” is important and “if deployed early enough,” they will act as tailwinds to stimulate domestic consumption and stabilize the real estate sector.

Homebuyer demand will gradually bottom out and mortgage loan growth is expected to stop slowing soon, Natixis’ Ng said, “but it will take more time and large-scale measures will see a strong overall recovery in the real estate market.”