Summary of Conference Call on China Property Market Industry Overview - The conference call focuses on the **China Property** market and discusses potential new policy stimulus measures aimed at revitalizing the housing sector and boosting consumption [1][6]. Key Points and Arguments Potential Policy Stimulus - Policymakers in China are considering additional stimulus measures for the property market, including: - Mortgage interest subsidies - Income tax rebates for mortgage holders - Tax rebates for property transactions - If implemented, these measures are expected to positively impact housing transaction volumes, prices, and household consumption [1][6]. Impact on Property Prices - Scenario analysis indicates that the proposed stimulus could lead to property price reductions of **7%-25%** for new housing transactions, with the majority of the impact (5%-15%) stemming from mortgage interest subsidies [2][7]. - A **1 percentage point (pp)** reduction in mortgage rates could align mortgage costs with average rental expenses, suggesting property prices may approach "fair values" [2][9]. Consumption Effects - The proposed stimulus measures would have a more significant impact if applied to existing mortgages rather than just new ones. - Current mortgage debt services account for approximately **6%** of households' disposable income in China, similar to developed markets like the US. - Estimated annual savings from interest subsidies and tax rebates for existing mortgage holders could reach around **Rmb560 billion** (approximately **2%** of total household debt services and income tax paid in 2024) by 2026-2027 [3][6]. Risks to Banks and Market Stability - If banks provide mortgage subsidies instead of government fiscal support, it could negatively affect their profitability. - The risk of property price stabilization in higher-tier cities by **2H2026E** is skewed to the downside due to: - Accelerating property price cuts in secondary markets - Slowing sales in the higher-end segment of new home markets - Increasing housing supply with defaulted mortgages [4][6]. Summary of Potential Savings from Stimulus - The total potential savings from the proposed stimulus measures could amount to **Rmb840 billion** annually, if both new and existing mortgage holders benefit from the subsidies [7][15]. - Breakdown of savings from different stimulus measures includes: - Mortgage interest subsidies: **Rmb437 billion** - Income tax rebates: **Rmb187 billion** - Deed tax exemptions: **Rmb180 billion** [7][15]. Additional Considerations - The analysis includes various assumptions regarding mortgage interest rates, loan-to-value ratios, and the share of mortgage balances that are tax-deductible. - The report emphasizes the importance of new policy stimulus in stabilizing the property market outlook and enhancing overall consumption in 2026 [6][15]. Other Important Information - The report includes detailed exhibits and data supporting the analysis, such as the impact of mortgage interest subsidies on household savings and property price trends [7][9][15]. - The potential implications of these policies on the broader economy and consumer behavior are also highlighted, indicating a significant interconnection between the property market and overall economic health in China [1][6].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - PPI deflation in China has deepened, with PPI inflation dropping to -3.6% year-on-year in June, marking the 33rd consecutive month of deflation [1][2] - The Chinese government is expected to implement incremental demand-side easing measures in the property market rather than large-scale stimulus, as long-term fundamentals do not support significant new apartment construction [4] - Upcoming macroeconomic data releases are anticipated to show solid performance, with Q2 real GDP growth forecasted at 5.2% year-on-year, slightly above the Bloomberg consensus of 5.1% [8] Summary by Sections PPI and CPI Trends - PPI inflation decreased from -3.3% in May to -3.6% in June, while CPI inflation increased slightly from -0.1% to +0.1% year-on-year [1][2] Property Market Outlook - Recent property data indicates a decline in house prices and home sales, leading to speculation about government stimulus; however, the report suggests that any measures will be modest and focused on renovation rather than new construction [4] Economic Data Expectations - Key macroeconomic indicators, including trade, credit, and GDP data, are expected to be released soon, with forecasts for trade and industrial production above consensus, while credit and retail sales forecasts are below consensus [8]