China’s vast real estate industry is recovering from a slump triggered by tighter debt controls, a deputy central bank governor said Friday, after a wave of defaults by developers rattled global financial markets.
Pan Gongsheng mentioned Evergrande Group, the global industry’s most heavily indebted developer, but gave no update on its government-supervised efforts to restructure 2.1 trillion yuan ($305 billion) in debt to banks and bondholders.
“Market confidence is recovering. Transaction activity in the real estate market has increased,” said Pan at a news conference ahead of the meeting of China’s legislature. “The financing environment, especially for high-quality enterprises, has improved significantly.”
Pan gave no indication Beijing planned significant changes in its debt controls, known as “three red lines.”
China’s economic growth slid in mid-2021 after regulators who worry debt levels are dangerously high blocked Evergrande and other heavily indebted developers from borrowing more money. That added to disruption from anti-virus controls.
Some developers collapsed and others defaulted on billions of dollars of debts to Chinese and foreign bond investors. Evergrande has said it has 2.3 trillion yuan ($330 billion) in assets but was struggling to convert that into cash to repay lenders.
Local governments took over some unfinished projects to make sure families got apartments that already were paid for.
In the final quarter of 2022, bond sales by developers rose 22% compared with a year earlier to 120 billion yuan ($17.5 billion), according to Pan. He said bank loans for real estate development also increased.
Meanwhile, the central bank governor said Beijing plans to keep the politically sensitive exchange rate of its yuan stable after it tumbled to a 14-year low against the U.S. dollar in September.
The exchange rate “will remain basically stable at a reasonable and balanced level,” Yi Gang said at the event with Pan.
The central bank intervened to stop the yuan’s slide after traders shifted money into dollars to profit from Federal Reserve interest rate hikes.
The exchange rate might face further pressure because more U.S. rate hikes are expected to cool economic activity and stubbornly high inflation while Beijing is easing lending controls to shore up sluggish economic growth.
A weaker yuan helps Chinese exporters by making their goods cheaper for foreign buyers, but it encourages capital to flow abroad. That raises borrowing costs in China.
The People’s Bank of China allows the yuan to trade within a narrow band around a rate set each morning. The central bank has tried to improve the financial system’s efficiency by making that mechanism more flexible but has backtracked to stop big changes in the exchange rate.
Yi, a former economics professor at Indiana University, and other People’s Bank leaders are due to be replaced this month in a once-a-decade change of government that will install supporters of Chinese leader Xi Jinping in key economic posts.
Yi noted the yuan has fallen below the symbolically significant level of seven to the dollar three times.
“The stability of economic and social expectations is very important,” he said.
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.
