"The third heavyweight" meeting is coming tomorrow, what signals will it release?

Policy rounds after rounds, October is destined to be a "policy honeymoon".

As I am writing this article, real estate stocks are soaring, with RONSHINECHINA closing up over 121%, Sunac China up over 40% (we sold early), Vanke up nearly 19%, and any increase below 15% cannot even make it to the first screen, indicating the market's frenzy in trading tomorrow's meeting expectations.

At 10 a.m. tomorrow, the Ministry of Housing and Urban-Rural Development, Ministry of Finance, Ministry of Natural Resources, People's Bank of China, and China Banking and Insurance Regulatory Commission will jointly hold a press conference to introduce the relevant situation of promoting the stable and healthy development of the real estate market and answer questions from reporters.

This is the fourth high-profile meeting since September 24, but I would describe it as the "third heavyweight" because the meeting of the National Development and Reform Commission was disappointing and cannot be considered a heavyweight.

On September 24, the first heavyweight meeting of the People's Bank of China released heavyweight information: reserve requirement ratio cut, policy interest rate cut, interest rate reduction for existing home loans, reduction of down payment for second homes, increase in central funding support for refinancing, extension of the "16 financial measures," and so on.

On September 26, the Z ZJ meeting clearly stated for the first time: "To promote the stabilization of the real estate market," which is a completely new proposition different from any previous ones, sending a more clear signal and determination to stabilize the property market.

On October 8, the meeting of the National Development and Reform Commission was brief.

On October 12, the press conference of the Ministry of Finance, the second heavyweight, introduced a package of fiscal stimulus policies, including special bonds, local debt replacement, livelihood support, research on canceling real estate value-added tax, and so on.

The Ministry of Housing and Urban-Rural Development is now the "third heavyweight".

Judging from the strong reaction of real estate stocks today, the market has high expectations for this meeting. I understand it for two reasons: one is the expectation for tomorrow's press conference, hoping for "better-than-expected" stimulus; the other is that the stocks have fallen sharply and have rebounded on their own. Like the real estate companies I have been following, since the peak on October 3, in just 9 trading days, Vanke has retraced 54%, Longfor has retraced 42%, Sunac has retraced 63%, Shimao has retraced 60%, JiaZuoYe has retraced 64%, and Xuhui has retraced 63.5%... It can be said that when they are not happy, they will collapse to show you (when they are happy, they will show you a bull market)... indeed, they have fallen almost enough.

How to view tomorrow's meeting? What signals will it release? Or will it be "below expectations"?

I think there are some aspects worth looking forward to, and some slightly disappointing areas.

The focus should be on:

The Ministry of Housing and Urban-Rural Development is undoubtedly the top priority, and they are expected to release how previous policies have been implemented (as well as incremental policies), such as further relaxation of the "city-specific policies" to ease the "five restrictions," renovation of old communities, guaranteed delivery of completed buildings, promotion of pilot projects for immediate sales, and support for housing construction through land acquisition and storage I believe the market will focus on Minister Ni's speech and press Q&A this time, whether there are new wordings between "no speculation in housing" and "stabilizing prices" and how to find a new balance between the challenging destocking of real estate and increasing affordable housing construction, and to find clues from it.

Attention to the Ministry of Natural Resources should still be on policies to reclaim idle land and activate existing land, with a focus on reducing land supply and allocating existing land to affordable housing without increasing supply.

Regarding the People's Bank of China and the China Banking and Insurance Regulatory Commission, there may not be much new, mainly on how to inject liquidity into the real estate market through monetary policy, as mentioned by the central bank before. Perhaps the central bank will release its views on the trend of the 10.20 Loan Prime Rate (LPR) on-site, with the market originally expecting a significant cut in the 9.20 LPR. Now that the Fed has also cut interest rates, we have a better foundation. But maybe not, I think the market is most concerned about this (my personal expectation is a 20 BP cut).

The last one is the Ministry of Finance, the market should continue to inquire about how and when the proposed reduction of value-added tax on real estate will be implemented, which is very important. Apart from this, whether other taxes and fees can be simultaneously reduced (such as personal income tax, deed tax, etc.), if the State Administration of Taxation participates in this meeting, it may significantly enhance market expectations. However, if not, it is uncertain whether the Ministry of Finance can answer this, so this could be a disappointing aspect.

In conclusion, this meeting is extremely important, possibly the last press conference before the end of October. The market has reason to expect this press conference to once again boost market confidence and maintain this hard-won "bull market."

Observing the market, the current "bull market" is actually very fragile. While the market is jubilant, there are concerns about its sustainability. This is what I have observed.

Looking at the real estate market, the market response is "very very" positive! People are starting to buy houses! Owners are starting to raise prices! Developers can see the light!... Real-time transaction data from various places shows that the daily signing volume in first and second-tier cities continues to hit new highs.

Shenzhen Zhongyuan data: as of October 13th, Shenzhen's new house subscription volume reached 4418 units in October, equivalent to the total signing volume of the past two months. Shenzhen Real Estate Association data: in the 41st week of this year (October 7th-13th), the city recorded 2316 second-hand houses, a 650% increase from the previous week! Setting a new high for a single week in nearly three years.

Last weekend, newly opened properties in Shenzhen recorded hot transactions. Longhua School District's Shenzhen Yeshangcheng Xuefu launched 332 units for sale, with 744 batches of registered customers, a registration ratio of 1:2.24, the highest this year, and sold out on opening day. Shajing Metro's Hongrongyuan Jiayufu also sold 90% of its new listings A few points can be seen from the above: 1) This round of policies is more targeted than any previous policies, stemming from the fact that the decision-making level has begun to admit and choose to positively combat TS; 2) It is expected that the positive impact of this round of policies on the market will exceed any previous rounds, effectively preventing the "asset price collapse" that occurred in August-September, which history will remember, and it is expected that housing prices will remain quite stable in the future; 3) Real transactions of new and second-hand houses in October are expected to set new records (LeYouJia mentioned that the current number of second-hand transactions in stores has exceeded 5,000 units), which will be successively reflected in subsequent signings. (Of course, the sell-out of ShenYe ShangCheng XueFu also shows the importance of price concessions. In the middle of 2022, HaiZhi XueShiLi can be seen that the former's discounted price for finished decoration is 76,000 RMB/square meter, while the latter's discounted price for finished decoration is 82,000 RMB/square meter).

The strong medicine of real estate policies has had an immediate effect on the recovery of residents' confidence. Today, Morgan Stanley released a survey indicating: Residents' views on the future of housing prices are beginning to improve. The bank conducted a survey of 2031 residents in 1st-4th tier cities, with 68% of respondents who have plans to buy a house believing that the recent relaxation of policies has had a "positive impact" on their home-buying plans, and the proportion of respondents who believe that housing prices will continue to fall in the next 12 months has decreased to 38%.

All of these show that when you choose the right policy measures, they will definitely have a substantial and effective impact. Although everyone knows that policies cannot solve fundamental problems, the right policy is definitely an important start, and a policy that exceeds expectations can certainly continue to drive market recovery.

This will be evident as soon as tomorrow.

Author of this article: Zhu Luoji, Source: Zhu Luoji, Original Title: "The 'Third Heavyweight' Meeting is Coming Tomorrow, What Signals Will It Release?"