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2026-08-24 16:07:38 China's housing provident fund is a RMB11 trillion capital pool, equivalent to 1.7x the forecast national new home sales value in 2026, UBS Asia-Pacific Head of Real Estate Research John Lam said. In his view, rental yield has now become a new anchor determining home prices, while the usage of housing provident fund loans has continued to decline over the past five years. Mobilizing the housing provident fund capital pool could become key to stabilizing the market. He noted that more than 60 cities in Mainland China have announced local-level provident fund reforms since the beginning of the year, including raising loan quota ceilings and relaxing usage restrictions. In June 2026, the Ministry of Housing and Urban-Rural Development issued the "Housing Provident Fund Management Regulations (Draft Revision for Consultation)", which for the first time incorporated a deposit and lending rate-setting mechanism, indicating that stabilizing the housing market may be a factor in determining housing provident fund interest rates. Over the past decade, housing provident fund rates were cut only three times for a total of 65 bps, while the PBOC benchmark rate or LPR was lowered nine times for a cumulative 140 bps, Lam said, implying room for further cuts in provident fund rates. UBS estimated that after five years of home price declines, rental yield is approaching borrowing costs. Switching from mortgage loans (3.1%) to provident fund loans (2.6%) could reduce buyers' financing costs by 50 bps. The bank expected that if provident fund rates are cut by 25 bps as in May 2025, it will mainly benefit secondary home transactions, followed by developers with exposure to T1 and T2 cities and actively replenishing land reserves. ~ AASTOCKS Financial News Website: www.aastocks.com | |