Rising Mortgage Rates Shifts Wealthy Investment Demand from Property to Equities

The last post discussed the rising fever in China's property market as government controls cause increased speculative demand.

There are powerful forces curbing investment demand though: tighter credit and rising interest rates. However, the report also shows this is a current shift. Expected real estate investment remained level according to the report from the Bank of Communications.

iFeng: 多城首套房贷利率上浮 小康家庭投资意愿减弱

On June 12th, the Bank of Communications released the “BoJin China Wealth Climate Index Report” (the total period No. 47) in Shanghai. The Bank of China’s China Fortune Climate Index was 141 points, a slight increase from the previous period by 1 percentage point. Among the three first-level indicators, except for the investment willingness index, which was the same as the previous period, the other two items showed a slight upward trend. Among them, the economic prosperity index rose by 1 percentage point, and the income growth index rose by 2 percentage points, indicating that the Xiaokang family's future economic trends Optimistic. Affected by the increase in the loan interest rate of the first-tier houses in many cities, the willingness of the well-to-do families to invest in real estate has weakened.

The investment willingness index for the current period was unchanged from the previous period and remained at 125 points. Thanks to the recent good performance of the stock market , the well-off family investors have a clear feeling of recovery, which is reflected in the increase in the current asset investment willingness index by 2%. The real estate investment willingness index fell by 2 percentage points.

The current investment appetite index for current assets is 142 points. On the upside of the Shanghai Composite Index, the US dollar index climbed. The rise in commodity prices drove the current liquidity investment behavior index of well-to-do households to rise by 3% from the previous period. From the perspective of investment willingness, with the exception of the wealth management products and precious metals of Bao, the investment willingness of the remaining investment products in the current period has risen to varying degrees. The willingness of banks to invest in wealth management products has risen the most, and it is also the most favored investment product for well-to-do families. Judging from the amount of investment, the bank's wealth management products have become the most-funded products for well-to-do families, and the stocks ranked second. The "Guidelines on Regulating the Asset Management Business of Financial Institutions" promulgated by the policy authorities require that the asset management business must not promise to protect the original income, and the product cannot be redeemed in any form when it is difficult to redeem the product. Well-to-do families tend to be cautious about their willingness to invest in wealth management products. While the price of gold is falling, the "Provisional Management Measures for Internet Gold Business (Exposure Draft)" stipulates that Internet companies may not provide any form of gold account services, and that well-to-do families may need to adapt to this process. As the A shares rose, the yields of the US dollar and US Treasury climbed, and the willingness of well-to-do families to invest in bonds, stocks, foreign exchange investments, and overseas assets increased significantly. In addition, as of May 18, the industrial products futures index rose by 0.39% on a weekly basis, rose by 3.48%, and the willingness of well-to-do families to invest in futures products was also driven.

The real estate investment willingness index for this period was 109 points, a drop of 2 percentage points. The real estate investment willingness index is expected to be 120 points, which is in line with the previous period. Now the real estate investment behavior index has dropped by 2 percentage points to 99 points, returning to the recession zone. According to the data released by the Bureau of Statistics, from January to April, the sales area of ​​commercial housing was 421.92 million square meters, an increase of 1.3% year-on-year, and the growth rate was down 2.3% from January to March. The sales of commercial housing were 3622.2 billion yuan, a year-on-year increase of 9.0%, and the growth rate dropped by 1.4 percentage points. Reflected in the current survey of households, real estate investment behavior index fell by 2%. The Ministry of Housing and Urban Development issued a document stating that it adhered to the continuity and stability of the control policy and seriously implemented the objectives and tasks of stabilizing house prices, controlling rents, reducing leverage, preventing risks, adjusting structure and stabilizing expectations. Against this background, the real estate investment willingness index for the current period is expected to remain unchanged from the previous period. Affected by the increase in the loan interest rate of the first suites in many cities, the willingness of the well-to-do families to invest in real estate has been weakened, but the willingness to invest in real estate is expected to remain unchanged.