Targeted demand-side stimulus and the equity market: evidence from China's mortgage interest-subsidy for first-time homebuyers

On 29 September 2026 China's Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration issued the Notice on Implementing the Residential Home-Purchase Mortgage Interest-Subsidy Policy (Caijin [2026] No. 95). From 1 October 2026 the central government subsidizes, for up to five years, one percentage point of the annual interest on newly issued commercial mortgages used by first-time buyers to purchase homes of at most 120 square metres and no more than RMB 1.5 million, on subsidized principal of up to RMB 1 million. This paper studies the stock-market response of the A-share real-estate sector to this sharply dated, narrowly targeted demand-side intervention. Using a single-factor market model on the 69 constituents of the CSI All-Share Real Estate Index, the estimated average abnormal return is +3.81% on the event day (29 September 2026), significant at the 1% level under the cross-sectional t (10.67), Patell (12.90) and Boehmer–Masumeci–Poulsen (10.48) tests. An equal-weighted portfolio gives an identical estimate, 94.2% of firms recorded positive abnormal returns, and the aggregate change in market value is about RMB 32.6 billion. The sector had already risen about 4.2% over the prior five sessions and gave back about 1.8% over the five sessions after the National Day holiday. The pattern is consistent with anticipatory pricing of a broader Q3-2026 housing-policy cluster and a partial reversal once the subsidy's modest scope was digested; even a fiscally small, targeted measure can move sector valuations materially, but only partly durably.

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Publication Details

Journal
Journal of Applied Economics and Policy Studies
Published
2026-10-27
DOI
https://doi.org/10.54254/2977-5701/2026.38362
Primary Topic
Financial Markets and Investment Strategies
Type
article
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article

Targeted demand-side stimulus and the equity market: evidence from China's mortgage interest-subsidy for first-time homebuyers

Guanzhong Pan
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Journal of Applied Economics and Policy Studies
Financial Markets and Investment Strategies
article

Targeted demand-side stimulus and the equity market: evidence from China's mortgage interest-subsidy for first-time homebuyers

Guanzhong Pan
article en

Abstract

On 29 September 2026 China's Ministry of Finance, the People's Bank of China and the National Financial Regulatory Administration issued the Notice on Implementing the Residential Home-Purchase Mortgage Interest-Subsidy Policy (Caijin [2026] No. 95). From 1 October 2026 the central government subsidizes, for up to five years, one percentage point of the annual interest on newly issued commercial mortgages used by first-time buyers to purchase homes of at most 120 square metres and no more than RMB 1.5 million, on subsidized principal of up to RMB 1 million. This paper studies the stock-market response of the A-share real-estate sector to this sharply dated, narrowly targeted demand-side intervention. Using a single-factor market model on the 69 constituents of the CSI All-Share Real Estate Index, the estimated average abnormal return is +3.81% on the event day (29 September 2026), significant at the 1% level under the cross-sectional t (10.67), Patell (12.90) and Boehmer–Masumeci–Poulsen (10.48) tests. An equal-weighted portfolio gives an identical estimate, 94.2% of firms recorded positive abnormal returns, and the aggregate change in market value is about RMB 32.6 billion. The sector had already risen about 4.2% over the prior five sessions and gave back about 1.8% over the five sessions after the National Day holiday. The pattern is consistent with anticipatory pricing of a broader Q3-2026 housing-policy cluster and a partial reversal once the subsidy's modest scope was digested; even a fiscally small, targeted measure can move sector valuations materially, but only partly durably.

Journal of Applied Economics and Policy StudiesVol. 19(11)
Yunnan University of Finance And Economics (CN)
Openalex Percentile: Top 9%
Financial Markets and Investment Strategies
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