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Category Archives: Housing

Chart: New Zealand Property Prices Drop

Source : Bloomberg

Infographic: The Salary You Need to Buy a Home in 50 U.S. Cities

See large image . . . . . .

Source : Visual Capitalist

China’s Property Market Slump and Weak Demand Highlight Fragile Economic Recovery

Orange Wang wrote . . . . . . . . .

An unexpected contraction in China’s factory activity in July has highlighted the stubborn headwinds facing the world’s No 2 economy, a situation that may demand more active fiscal measures and support for the ailing property sector, according to analysts.

The official manufacturing purchasing managers’ index (PMI) slid from 50.2 in June to 49 last month, well below the 50-mark that separates growth from contraction on a monthly basis. A private survey also declined more sharply than analysts expected.

“The fastest period of recovery after the economic reopening is close to an end, with insufficient demand becoming a major constraint,” China Minsheng Bank said in a note on Sunday.

The private bank said the economy faced twin threats: weak demand overseas, with developed economies slipping into recession; while consumption and the real estate market were sluggish at home.

Simply relying on infrastructure investment was not enough to bolster the economy and more policy support was needed, the bank said.

Wary of fuelling the type of inflation ravaging Western economies, Beijing has ruled out large-scale stimulus, although it has made repeated calls for local authorities to help stabilise the economy ahead of a leadership reshuffle later this year. However, the increasingly precarious economic environment may mean authorities need to do more – and fast.

Liu Siliang, senior researcher at the Rushi Advanced Institute of Finance, said the property downturn was weighing on the whole economy, as the real estate sector and related industries accounted for about one third of gross domestic product (GDP).

China’s property sector has taken a sharp downwards turn over the past two years, due primarily to a regulatory crackdown on lending and the impact of the pandemic.

Output from the sector shrank by 7.0 per cent in the second quarter from a year earlier, the worst reading among all Chinese industries, according to government data. Among China’s top 100 developers, there was also a year-on-year drop of 39.7 per cent in contract sales in July, market data showed.

In the past month, mortgage-payment boycotts have erupted in a number of provinces.

“Although the government [worked] quickly to stop the spread of risks, it will take a long time for real estate to stabilise and recover, and residents’ expectations to change,” Liu said in a note on Monday.

At its half-year meeting on Monday, the People’s Bank of China said it would keep real estate credit, bonds and other financing channels stable, and explore new development models for the sector.

Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Bank, said the real estate market would be “the most important downside risk” for the Chinese economy this year.

The Politburo meeting last Thursday suggested that authorities might move to ensure cash-strapped developers had credit, he said, noting it also stressed the responsibilities of local governments in delivery of commodity housing units.

“That is supposed to be a positive signal,” he said.

The meeting mentioned stabilising the property market ahead of an oft-repeated line about curbing housing speculation. It also ordered local governments to ensure delivery of commodity housing units and make full use of policy tool kits.

“That is of great significance to stabilise market confidence, especially the sales market,” said Tao Chuan, chief macro analyst at Soochow Securities.

“But the direct effect on stabilising property investment is still limited,” he added in a note on Friday, expecting more measures by local governments in the second half of the year.

Ding said Chinese authorities are likely to issue an additional 1.5 trillion yuan (US$221.8 billion) of local special-purpose bonds in the second half of the year to boost the economy.

The Politburo sent a clear message that “expanding demand” should stand at the core of China’s fiscal and monetary policies. But it skipped any mention of the annual economic growth target of “around 5.5 per cent”, vowing instead to “strive for the best outcome” and maintain dynamic zero-Covid control as a priority.

The statement added to expectations that Beijing would not release another fiscal support package after unveiling a 33-point plan to stabilise growth in May.

Speaking at the World Economic Forum in late July, Chinese Premier Li Keqiang made it clear that Beijing will not flood the economy with stimulus.

“Under current circumstances, there is room in fiscal and monetary policies to achieve a fairly high growth rate in the second half of the year. But we cannot compromise future interests, and we need to both stabilise growth and avert inflation,” he said.

At a State Council meeting on Friday, Li said the third quarter was crucial for China’s economic rebound as it is the peak season for construction.

Projects receiving central government budgetary investment will be accelerated and local governments have been urged to expedite the use of special-purpose bonds, according to the meeting.


Source : SCMP

Chart: Home Prices in China Keep Falling

Source : Caixin

China’s Home Sales Slump Further During Mortgage Boycotts

China’s top 100 developers saw home sales slump further in July, indicating a widening mortgage boycott crisis emerging around the country has further weighed on buyer confidence.

Combined contract sales plunged 39.7% from a year earlier to 523.1 billion yuan ($78 billion), according to data compiled by China Real Estate Information Corp., as demand remained stagnant amid an economic downturn despite government efforts to stimulate purchases.

The pace of decline was narrower than the previous month’s 43% fall, CRIC said in a report. However, combined sales plummeted 49% in the first seven months, a relatively steep drop compared with the magnitude of declines in the same period of previous years, the report said, without elaboration.

The preliminary July sales figures provide the first reading on property purchases since homebuyers nationwide began refusing to pay mortgages on stalled projects. A revival of home sales is needed to generate cash for debt-laden developers like China Evergrande Group and reduce mounting pressure on banks and the economy.

“Overall market demand and purchasing power have been overdrawn, while the industry confidence is also at a low level,” CRIC said in the report. “Developers are still facing heavy de-stocking pressure in the short term.”

The Chinese government has been racing to rescue its all-important real estate sector as a long-standing crackdown on leverage and speculation hits demand. Authorities have cut borrowing costs and down payments among other measures to shore up a sector that accounts for about a quarter of the world’s second-largest economy.

Financial regulators have also urged banks to boost lending to builders to help finish the projects, while the Politburo, the Communist Party’s top decision-making body, last month vowed to maintain real-estate market stability. Authorities are considering a plan to seize undeveloped land from distressed real estate firms to help finance the completion of stalled projects, people familiar with the matter said last week.

China’s overall property loans rose at the slowest rate on record as of the end of June, as banks were cautious about lending to cash-strapped developers while household demand for mortgages was weak. Housing prices fell for a 10th straight month in June.

CRIC said local authorities around the country are expected to further ramp up property policy stimulus, with the country’s second-, third- and fourth-tier cities expected to further ease restrictions.

Cities under heavy pressure from the property slump will likely implement fiscal measures to stimulate home buying and stabilize market expectations, the report said, adding that ensuring delivery of housing projects would be an important task for builders as stressed at the latest Politburo meeting.


Source : BNN Bloomberg

Charts: U.S. New Home Sales and Prices Down In June

Source : ZeroHedge

Chart: U.S. Existing Home Sales Down in June 2022

Source : Bloomberg

China Raises Loan-support Efforts for Developers Amid Mortgage Boycott

Chinese regulators stepped up efforts to encourage lenders to extend loans to qualified real estate projects as the beleaguered property sector faced fresh risks from a widening mortgage-payment boycott on unfinished houses.

The China Banking and Insurance Regulatory Commission (CBIRC) told the official industry newspaper on Sunday that banks should meet developers’ financing needs where reasonable.

The CBIRC expressed confidence that with concerted efforts, “all the difficulties and problems will be properly solved,” the China Banking and Insurance News reported.

The remarks come as a growing number of homebuyers across China threatened to stop making their mortgage payments for stalled property projects, aggravating a real estate crisis that has already hit the economy. read more

The latest news helped banking and property stocks recover some of their recent losses. China’s banking index, which tumbled 7% to a more than two-year low last week, bounced 1.4% on Monday. Chinese real estate stocks gained 3.1% on the mainland, and jumped 3.7% in Hong Kong.

The rebound in Chinese banking stocks was also aided by news that China will accelerate the issuance of special local government bonds to help supplement the capital of small banks, part of efforts to reduce risks in the sector.

China may also allow homeowners to temporarily halt mortgage payments on stalled property projects without incurring penalties, Bloomberg reported after the market close on Monday, citing people familiar with the matter.

The report added that homeowner eligibility and the length of grace periods would be decided by local governments and banks, and the yet-to-be-finalised proposal from financial regulators would require approval from senior Chinese leaders.

HOPING FOR STABILITY

Official data on Friday showed output in the property sector shrank 7% in the second quarter from a year earlier, marking the fourth straight quarter of decline.

New real estate loans in June were expected at more than 150 billion yuan ($22.23 billion), compared with a contraction in May, state television CCTV reported on Monday.

“I think the Chinese government has the will and means to solve the problem, and will likely take swift actions,” said Mark Dong, Hong Kong-based co-founder and general manager of Minority Asset Management.

“The biggest risk is impairment to consumer confidence, which threatens the nascent recovery in property sales.”

Dong expects state-owned developers to step in and acquire troubled projects from heavily-indebted private peers, accelerating an industry consolidation.

The CBIRC vowed last Thursday to strengthen its coordination with other regulators to “guarantee the delivery of homes”.

Already more than 200 projects have been affected by the mortgage boycott by homebuyers across the country, and at least 80 property developers are affected so far, E-house China Research and Development Institution said in a report published on Monday.

E-house estimated stalled real estate projects across China involve 900 billion yuan worth of mortgages in the first half, or 1.7% of the total outstanding mortgage loans.

In the Sunday interview, CBIRC urged banks to “shoulder social responsibility” and actively participate in the study of plans to fill the funding gap and support acquisitions of real estate projects.

The regulator hoped these steps would help stabilise the property market by enabling the swift resumption of stalled real estate construction and delivery of homes to buyers early.


Source : Reuters

Chart: U.S. Home Sales Are Getting Canceled at the Highest Rate Since the Start of the Pandemic

More Chinese Homebuyers Refuse to Pay Mortgage Loans Amid Contagion Fears

A rapidly increasing number of disgruntled Chinese homebuyers are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system.

Homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, according to researcher China Real Estate Information Corp. That’s up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies Financial Group Inc. analysts including Shujin Chen.

“The names on the list doubled every day in the past three days,” Chen wrote in a note published Thursday. “The incident would dampen buyer sentiment, especially for presold products offered by private developers given the higher risk on delivery, and weigh on the gradual sales recovery.”

The delayed projects make up about 1% of China’s total mortgage balance, according to Jefferies. Should every buyer default, that would lead to a 388 billion yuan ($58 billion) increase in non-performing loans, Chen said. The report didn’t give any estimate for how many buyers are snubbing repayments.

Some major Chinese banks rushed to respond during trading hours on Thursday as the CSI 300 Banks Index fell as much as 3.3%. State-owned Agricultural Bank of China Ltd. said it held 660 million yuan of overdue loans on unfinished homes, while smaller rival Industrial Bank Co. said 1.6 billion yuan of mortgages were impacted, of which 384 million yuan have become delinquent. China Construction Bank Corp., the nation’s largest mortgage lender, said overall risks are controllable as its exposure to delayed projects is small.

The payment refusals underscore how the storm engulfing China’s property sector is now affecting hundreds of thousands of average citizens, posing a threat to social stability ahead of a Communist Party Congress later this year. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults. A Bloomberg Intelligence index of Chinese developer stocks slid as much as 2.7%.

Analysts believe that a drop in home values may be another driver for the refusal to meet mortgage payments. “Investors are concerned about the spread of mortgage payment snubs to buyers, simply due to lower property prices, and the impact on property sales,” Chen wrote.

Average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years, Citigroup Inc. analysts said in a note on Wednesday. China’s home prices fell for a ninth month in May, with June figures set for release Friday.

The crisis engulfing Chinese developers is reaching a new phase, with a debt selloff expanding to firms once deemed safe from the cash crunch, including Country Garden Holdings Co., the largest builder by sales.

While rising non-performing loans for Chinese banks are “manageable” for now, “more risk events are likely to come, at the backdrop of China’s growth slowdown, residents’ expectation of worse future income, and shrinking property sales,” affecting China’s social stability, Jefferies’s Chen said.

Presale Risks

Nomura Holdings Inc. analysts said the refusal to pay mortgages stems from the widespread practice in China of selling homes before they’re built. Confidence that projects will be completed has weakened as developers’ cash woes intensified.

Even before the crisis, developers only delivered around 60% of homes they presold between 2013 and 2020, while outstanding mortgage loans rose by 26.3 trillion yuan, Nomura analysts including Ting Lu wrote in a note Wednesday.

“Presales carry mounting risks for developers, homebuyers, the financial system and the macro economy,” Lu wrote. Failure to build homes on time reduces households’ willingness to buy new properties, and rising raw material prices may mean funds from presales are insufficient to construct them.

“We are especially concerned about the financial impact of the homebuyers’ ‘stopping mortgage repayments’ movement,” Ting wrote. “China’s property downturn may finally adversely affect onshore financial institutions after hitting the offshore high-yield dollar bond market.”


Source : Bloomberg


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