Highlights

• The central government will subsidise interest on new first-home mortgages by 1ppt a year from 1 Oct for properties valued below Rmb1.5m, with eligible loans capped at Rmb1m for up to five years. The policy support is expected to benefit lower-tier cities and the second-hand market, with a mixed impact on investors’ sentiment. Premier Li Qiang separately called for further measures to stabilise the property market.
   
• Beijing and Shanghai published implementation rules for the 28 August reform of housing sales, setting a reference for other cities, and Tier 1 land supply rose to 17 sites at a Rmb61.8b reserve price in Sep 26, up 12% mom and 3.5x yoy, with the premium on settled lots at 12.9%.
   
• Maintain UNDERWEIGHT. Our top picks are COLI and CR Mixc.

Analysis

• Central government finally announces nation-wide mortgage interest subsidy. On 29 September, the Ministry of Finance, the PBOC and the National Financial Regulatory Administration announced a one-year mortgage interest subsidy programme, effective from 1 Oct 26. As we noted in last week’s report, this policy was very likely amid an accelerated decline in mortgage lending in 2026. To qualify, these three conditions must be met: a) it must be a newly issued commercial mortgage for a first-home purchase, excluding refinancing; b) the home size should be no more than 120 sqm; and c) the purchase price does not exceed Rmb1.5m. Eligible loans are capped at Rmb1m, with a 1ppt annual interest subsidy for up to five years. For a Rmb1m loan, this means a maximum interest saving of Rmb10,000 per year, or Rmb50,000 over five years.
   
• Mortgage subsidy to benefit lower-tier cities and second-hand market. Limited data suggest that homes priced below Rmb1.5m accounted for: a) 34.4% of Guangzhou’s combined primary and secondary market transactions in 2025, and b) 61% of new-home sales in Chongqing in 1H26. In general, the second-hand market sees a higher share of low-price units than the new-home market. We expect the policy to benefit second-hand transactions, as well as new-home markets in suburban Tier 1 and Tier 2 areas and lower tier cities.
   
• Mixed impact on investor sentiment. On the positive side, this is the first time the central government has subsidised interest on commercial residential mortgages, and the 100bp subsidy is at the upper end of market expectations (40-100bp). However, the eligibility criteria are narrower than expected, covering only a subset of first-home buyers.
   
• Premier LI Qiang called for further policies to stabilise the property market. At the State Council executive meeting on 28 September, Li called for stronger counter-cyclical policy support and asked officials to study and introduce measures to stabilise the property market and boost employment and household income. Despite the announced interest subsidy, we expect further easing measures to be introduced.