Connect with us

Real eState

China's real estate crisis could threaten growth into 2022. Beijing's undeterred – CNN

Published

 on


A version of this story appeared in CNN’s Meanwhile in China newsletter, a three-times-a-week update exploring what you need to know about the country’s rise and how it impacts the world. Sign up here.

Hong Kong (CNN Business)China’s growth is seriously slowing down as the country lurches from one economic threat to another. And while some of the biggest pain points appear to be easing, an unfolding crisis in real estate is emerging as one of Beijing’s toughest challenges in the coming year.

The country’s GDP grew at its slowest pace in a year last quarter, expanding just 4.9% from a year earlier. Compared to the prior quarter, the economy grew a mere 0.2% in the July-to-September period — one of the weakest quarters since China started releasing such records in 2011.
Disruptions due to the global shipping crisis and a massive energy crunch contributed to the slowdown.
Shipping delays and mounting inventories in China have hit smaller manufacturers that are now hurting for cash, resulting in lost orders and production cuts. And factory output has been dented in large part because of power shortages, a result of high demand for fossil fuel that has clashed with a national push to reduce carbon emissions.
But some of the most significant concerns for growth are now rippling through the real estate sector, which is suffering from the energy woes along with a government drive to curb excessive borrowing.
Real estate-related activities — including cement and steel production — registered steep contractions last month, as did property sales and new construction projects. That has led to reduced property investment, which contracted in September for the first time since March 2020.
On Wednesday, the National Bureau of Statistics announced that average housing prices in 70 major cities dropped slightly in October from the previous month. Goldman Sachs estimated the month-on-month drop at an annualized rate of 0.5%, the first decline since April 2015.
While the power crunch has undoubtedly weighed on the real estate sector, Beijing’s crackdown is also taking its toll. Fearing the property market had become overheated, the government last year started requiring developers to cut their debt levels. It has also pledged to tame runaway home prices.
Since then, companies like embattled conglomerate Evergrande have been grappling with major debt problems, triggering worries about the risk of contagion for the sector and the broader economy.
Beijing seems unlikely to do much to ease its tight curbs on the real estate sector, according to economists at Société Générale — “possibly because they are attributing most of the blame to the power crunch, which has now eased but is not resolved.”
“To our mind, housing is the key and there seems nothing substantial in the near term to mitigate the downtrend,” wrote the firm’s Wei Yao and Michelle Lam in a Monday report. They added that there is a “very strong consensus among policymakers that housing is at the root of China’s many structural problems.”
A real estate downturn will almost certainly continue to weigh on economic growth. Research firms and banks have already slashed their forecasts for China’s GDP this year and next, worrying that the risks of a severe, property-led slowdown are rising.
Oxford Economics, for example, cut its forecast for fourth quarter growth to 3.6% from 5%. The firm recently trimmed its 2022 GDP forecast to 5.4% from 5.8%, mostly due to concerns about the real estate sector, power shortages and Covid-19.
“Stakes are high in managing the property slowdown,” wrote Louis Kuijs, head of Asia economics at Oxford Economics, in a Wednesday report. He added the “relatively large economic footprint” of the real estate sector in China — it comprises about a quarter or so of GDP — means even a gradual or “managed” slowdown would “significantly” affect the economy.

A ‘key’ challenge long-term

The housing crackdown is China’s “key long-term challenge,” according to Aidan Yao, senior emerging Asia economist with AXA Investment Managers. He downgraded his forecast for GDP growth this year to 7.9% from 8.5%, partly because of Beijing’s firm stance on controlling debt in the property market and elsewhere. Meanwhile, he sees some downside risks to his 2022 forecast of 5.5% growth.
Chinese President Xi Jinping’s desire to control the housing market is no secret. In 2017, he famously announced that “housing is for living and not for speculation.”
But Beijing’s campaign has gained additional momentum during the coronavirus pandemic, as the government became concerned that too much cheap money was flooding a sector that was already highly leveraged. That worry led authorities to force developers last year to trim their debt levels.
This year, Xi has also ramped up promises to close what he sees as a worsening wealth gap, saying “common prosperity” would be a top government priority. That pledge has been reflected in tightening rules on all sorts of industries, including tech and other types of private enterprise.
But it’s also apparent in real estate, as Chinese state media outlets blame soaring housing prices for worsening income inequality.
As all of this unfolds, a liquidity crunch has worsened among the real estate sector’s weakest corporations. Evergrande — which is China’s most-indebted developer — has repeatedly missed interest payments and warned it could default.
The company’s crisis has unsettled global investors in recent weeks, who worry a bankrupt Evergrande could lead to a domino effect. Other property firms, including Fantasia Holdings and Modern Land, have already indicated they are struggling to pay their debts.
Chinese authorities have tried to assuage fears about Evergrande. The People’s Bank of China said Friday the company had mismanaged its business but risks to the financial system were “controllable.”
Yao, from AXA Investment Managers, said Beijing isn’t likely to change its course on regulation.
“Beijing’s tolerance for short-term pains from actions that foster longer-term sustainability has been a major surprise to the market anticipating a blow-out growth number for 2021,” he said. The tech crackdown, after all, has wiped more than $1 trillion off the value of major Chinese stocks worldwide, but isn’t slowing down, either.
Yao added that while there may be “further fine-tuning” of housing market policies, he sees “no reversal to the overall tightening stance.”

Adblock test (Why?)



Source link

Continue Reading

Real eState

A Large Canadian Real Estate Brokerage Has Forecast Prices Will Rise Up To 20% – Better Dwelling

Published

 on


[unable to retrieve full-text content]

  1. A Large Canadian Real Estate Brokerage Has Forecast Prices Will Rise Up To 20%  Better Dwelling
  2. House prices in Canada will rise higher in 2022, real-estate report says  CTV News
  3. Canada’s Real Estate Prices are Expected to Rise 9.2% in 2022: RE/MAX  Storeys
  4. Housing prices in Ottawa will rise five per cent in 2022, Remax estimates  CTV News Ottawa
  5. 2 Factors That May Impact the Real Estate Market in 2022  Real Simple
  6. View Full coverage on Google News



Source link

Continue Reading

Real eState

Why real estate agents are urging Canadians not to wait for spring to sell their house – Ottawa Sun

Published

 on


Rising mortgage rates could mean a spring slowdown for Canada’s housing market

Article content

The pandemic-triggered housing boom has shredded a number of long-standing assumptions Canadians have about real estate.

Advertisement

Article content

Distance from, not nearness to, downtown cores is now a key buyer desire. Communities that were unpopular with buyers two years ago because of a lack of jobs or amenities are some of today’s most active markets. Even taking out a gargantuan mortgage in the midst of a crushing global recession went from “undeniably risky” to “par for the course” seemingly overnight.

And this Great Real Estate Rethink continues: A new survey by real estate brokerage Royal LePage finds that 79 per cent of real estate professionals think sellers should list their homes this winter rather than waiting until spring 2022.

Winter is traditionally the slowest season for home sales in Canada. But buyers have already tossed aside so many real estate traditions. What’s one more?

Advertisement

Article content

Survey says…

The pro-winter listing sentiment is strong across all regions.

Realtors in British Columbia led the way, with 93 per cent of respondents in the province saying they would advise their clients to sell this winter; 87 per cent of agents in Quebec and 85 per cent of those in Atlantic Canada shared the same view.

The proportion of agents in favour of winter listings were lower in Ontario (72 per cent), Alberta (73 per cent) and the remaining prairie provinces, Manitoba and Saskatchewan (75 per cent).

While those numbers are all high, many of the real estate agents surveyed — at least half in every area of the country — were advising their clients to list in the winter even before the pandemic. The reason then is the same as it is today: A painfully low number of homes for sale has created a seller’s market so rabid that weather is the last thing desperate buyers are worried about.

Advertisement

Article content

“Typically we see a seasonal adjustment in real estate activity,” says Adil Dinani of Royal LePage West Real Estate Services in Vancouver. “However, last year, we saw one of the busiest winter markets in our history. Even if there are fewer buyers in the winter, it is unlikely there will be enough inventory on the market to satisfy demand.”

That could be especially true in Toronto, where there were only 7,750 homes left on the market at the end of October.

“That’s versus 17,000 last year,” says Cameron Forbes, general manager and broker at RE/MAX Realtron Realty in Toronto.

But Forbes still believes that a spring listing is better for sellers, pointing out that since 1999 there have, on average, been more homes on the market in the winter in the GTA than in the spring. If selling in a low-supply market is the goal, why not wait until the spring, when the market will be even more depleted?

Advertisement

Article content

“All things being equal, that’s a better time to sell your home,” he says. “That’s why agents will generally recommend that you wait to list in the spring market, when your home shows well and, frankly, when buyers are out looking to buy.”

Low supply vs. the harsh Canadian winter

You may have noticed that the areas where the preference for winter listings were lowest are in parts of the country where winter can be especially brutal. (Ontario’s placement in this category may have more to do with fears around what an extra three or four months might do to the province’s already sky-high prices.)

And this one could be particularly messy. Both The Weather Network and the Farmer’s Almanac are preparing Canadians for a potentially long, storm-filled winter.

Advertisement

Article content

Can sellers in hard-hit markets really plan on buyers being hungry enough to brave the elements and view properties when winter’s at its most miserable?

Regina-based Royal LePage agent Shayla Ackerman, no stranger to extreme winter weather, says listing in the winter is not something she would recommend unless a seller has no other choice.

“Our winter market slows right down,” she says.

But in Montreal, which also receives its fair share of colossal snow-dumps, Century 21 Immo-Plus agent Angela Langtry expects buyers to be out in droves.

“We are still in a low-inventory market, especially for houses,” Langtry says. “I always say that the serious buyers come out in the snow storms.”

A spring housing slowdown?

Capitalizing on raging buyer demand is not the only reason to list your home this winter.

Advertisement

Article content

The Bank of Canada announced in late October that it is ending a key pandemic emergency measure: buying billions of dollars in bonds to keep interest rates low, including those attached to mortgages.

If mortgage rates begin rising, and mortgage amounts begin shrinking, buyers may have less buying power in the spring. Listing now may give sellers one last shot at enticing buyers while they have more money to play with.

But Paul Taylor, president and CEO of trade association Mortgage Professionals Canada, isn’t sure a rise in interest rates will impact buyers’ budgets in the next few months.

“Almost everyone is qualifying at a 5.25 per cent stress test rate today,” Taylor says, referring to the benchmark interest rate lenders use to evaluate mortgage applicants’ ability to repay their loans.

Advertisement

Article content

Even if the Bank of Canada were to raise interest rates by 100 basis points, or one per cent, over the next 12 months, Taylor says buyers who qualified at 5.25 per cent would still have at least 200 basis points worth of breathing room, meaning their mortgage budget “will be effectively unchanged.”

Taylor expects a 0.25 per cent increase in the BoC’s overnight rate, which should trigger a rise in variable mortgage rates, in the spring. He says two additional increases could occur before the end of 2022.

“I expect the media coverage of the tiny rate increases will scare many and slow the market, which is likely very good for everyone, but I don’t think we’ll see enough of a slowdown to erode prices,” Taylor says.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Adblock test (Why?)



Source link

Continue Reading

Real eState

Why real estate agents are urging Canadians not to wait for spring to sell their house – Financial Post

Published

 on


Rising mortgage rates could mean a spring slowdown for Canada’s housing market

Article content

The pandemic-triggered housing boom has shredded a number of long-standing assumptions Canadians have about real estate.

Advertisement

Article content

Distance from, not nearness to, downtown cores is now a key buyer desire. Communities that were unpopular with buyers two years ago because of a lack of jobs or amenities are some of today’s most active markets. Even taking out a gargantuan mortgage in the midst of a crushing global recession went from “undeniably risky” to “par for the course” seemingly overnight.

And this Great Real Estate Rethink continues: A new survey by real estate brokerage Royal LePage finds that 79 per cent of real estate professionals think sellers should list their homes this winter rather than waiting until spring 2022.

Winter is traditionally the slowest season for home sales in Canada. But buyers have already tossed aside so many real estate traditions. What’s one more?

Advertisement

Article content

Survey says…

The pro-winter listing sentiment is strong across all regions.

Realtors in British Columbia led the way, with 93 per cent of respondents in the province saying they would advise their clients to sell this winter; 87 per cent of agents in Quebec and 85 per cent of those in Atlantic Canada shared the same view.

The proportion of agents in favour of winter listings were lower in Ontario (72 per cent), Alberta (73 per cent) and the remaining prairie provinces, Manitoba and Saskatchewan (75 per cent).

While those numbers are all high, many of the real estate agents surveyed — at least half in every area of the country — were advising their clients to list in the winter even before the pandemic. The reason then is the same as it is today: A painfully low number of homes for sale has created a seller’s market so rabid that weather is the last thing desperate buyers are worried about.

Advertisement

Article content

“Typically we see a seasonal adjustment in real estate activity,” says Adil Dinani of Royal LePage West Real Estate Services in Vancouver. “However, last year, we saw one of the busiest winter markets in our history. Even if there are fewer buyers in the winter, it is unlikely there will be enough inventory on the market to satisfy demand.”

That could be especially true in Toronto, where there were only 7,750 homes left on the market at the end of October.

“That’s versus 17,000 last year,” says Cameron Forbes, general manager and broker at RE/MAX Realtron Realty in Toronto.

But Forbes still believes that a spring listing is better for sellers, pointing out that since 1999 there have, on average, been more homes on the market in the winter in the GTA than in the spring. If selling in a low-supply market is the goal, why not wait until the spring, when the market will be even more depleted?

Advertisement

Article content

“All things being equal, that’s a better time to sell your home,” he says. “That’s why agents will generally recommend that you wait to list in the spring market, when your home shows well and, frankly, when buyers are out looking to buy.”

Low supply vs. the harsh Canadian winter

You may have noticed that the areas where the preference for winter listings were lowest are in parts of the country where winter can be especially brutal. (Ontario’s placement in this category may have more to do with fears around what an extra three or four months might do to the province’s already sky-high prices.)

And this one could be particularly messy. Both The Weather Network and the Farmer’s Almanac are preparing Canadians for a potentially long, storm-filled winter.

Advertisement

Article content

Can sellers in hard-hit markets really plan on buyers being hungry enough to brave the elements and view properties when winter’s at its most miserable?

Regina-based Royal LePage agent Shayla Ackerman, no stranger to extreme winter weather, says listing in the winter is not something she would recommend unless a seller has no other choice.

“Our winter market slows right down,” she says.

But in Montreal, which also receives its fair share of colossal snow-dumps, Century 21 Immo-Plus agent Angela Langtry expects buyers to be out in droves.

“We are still in a low-inventory market, especially for houses,” Langtry says. “I always say that the serious buyers come out in the snow storms.”

A spring housing slowdown?

Capitalizing on raging buyer demand is not the only reason to list your home this winter.

Advertisement

Article content

The Bank of Canada announced in late October that it is ending a key pandemic emergency measure: buying billions of dollars in bonds to keep interest rates low, including those attached to mortgages.

If mortgage rates begin rising, and mortgage amounts begin shrinking, buyers may have less buying power in the spring. Listing now may give sellers one last shot at enticing buyers while they have more money to play with.

But Paul Taylor, president and CEO of trade association Mortgage Professionals Canada, isn’t sure a rise in interest rates will impact buyers’ budgets in the next few months.

“Almost everyone is qualifying at a 5.25 per cent stress test rate today,” Taylor says, referring to the benchmark interest rate lenders use to evaluate mortgage applicants’ ability to repay their loans.

Advertisement

Article content

Even if the Bank of Canada were to raise interest rates by 100 basis points, or one per cent, over the next 12 months, Taylor says buyers who qualified at 5.25 per cent would still have at least 200 basis points worth of breathing room, meaning their mortgage budget “will be effectively unchanged.”

Taylor expects a 0.25 per cent increase in the BoC’s overnight rate, which should trigger a rise in variable mortgage rates, in the spring. He says two additional increases could occur before the end of 2022.

“I expect the media coverage of the tiny rate increases will scare many and slow the market, which is likely very good for everyone, but I don’t think we’ll see enough of a slowdown to erode prices,” Taylor says.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Adblock test (Why?)



Source link

Continue Reading

Trending