BEIJING — China needs to do more in order to fix its real estate problems, the International Monetary Fund said Friday.
The property market contributes to about a quarter of China’s GDP and has been a drag on growth, especially since Beijing cracked down on developers’ high reliance on debt in 2020.
“Authorities’ recent policy measures are welcome, but in our view additional action will be needed in order to end the real estate crisis,” Thomas Helbling, deputy director in the IMF’s Asia Pacific Department, said in a briefing.
“If you look at the measures, a lot of them address financing issues for the developers that are still in relatively good financial health, so that will help,” he added in an interview with CNBC. “But the problems of the property developers’ facing severe financial difficulties are not yet addressed. The issue of the large stock of unfinished housing more broadly is not yet addressed.”
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Chinese authorities subsequently emphasized the need to help developers finish building those pre-sold apartments. Still, residential floor space sold in China dropped by nearly 27% last year, while real estate investment fell by 10%, according to official numbers.
“I think it would be helpful to point to a way out and … how the restructuring could be done and who will absorb losses if there are any losses,” Helbling said. He also called for additional measures to address the large stock of unfinished apartments.
“Otherwise the sector will continue to slump and remain a risk and also constrain households that are overexposed to the property sector, and will have cash tied up and their savings tied up which will be a handicap for the broader economic recovery,” he said.
Helbling declined to name a specific timeframe within which authorities needed to act before the situation got much worse.
“The sooner you address downside risks the better.”
China says it’s not a crisis
The IMF analysis was part of the organization’s latest report on China, following annual discussions with Chinese officials that ended in November.
The officials pushed back on the IMF’s real estate assessment, according to a statement in the IMF report by Zhengxin Zhang, executive director for People’s Republic of China, and Xuefei Bai, senior advisor to the executive director, dated Jan. 12.
China’s property market has generally operated smoothly and “is not in a ‘crisis’ situation,” the statement said, casting the sector’s situation as “a natural evolution of ‘deleveraging and destocking’ in the past few years.”
“The related risks are local and only concern individual firms, and their impact on the rest of the world has been relatively small,” the central bank representatives said. Looking ahead, the Chinese side said they would work toward ensuring the delivery of completed apartments, and merging developers.
Chinese property developers such as Country Garden, Longfor and R&F Properties have seen their shares nearly double or more over the last 60 trading days — about three months, according to Wind Information. But trading in shares of one-time giants Evergrande, Shimao and Sunac have been halted since March 2022.
The IMF report pointed out that a significant portion of investors in Chinese developers’ bonds have been affected.
“As of November 2022, developers that have already defaulted or are likely to default — with average bond prices below 40 percent of face value — represented 38 percent of the 2020 market share of firms with available bond pricing,” the report said.
“The sector’s contraction is also leading to strains in local governments. Falling land sale revenues have reduced their fiscal capacity at the same time as local government financing vehicles (LGFVs) have also significantly increased land purchases.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
