China’s bid to rein in its debt-ridden property market has become a high-stakes balancing act: clamp down on excessive real estate construction without squeezing so hard that it sends developers under.
Even as Beijing doubles down on reducing the Chinese economy’s reliance on the country’s vast real estate sector, authorities are loosening restrictions on lending and home approvals to avoid a market collapse amid a liquidity crisis that has pushed developers such as China Evergrande Group close to bankruptcy.
Bank credit is being rolled out to property firms at a higher level than in any period during the second quarter or third quarter, according to data collected by China Beige Book International, with mortgage lending in October increasing to 200 billion yuan ($31bn) from 150 billion yuan ($23.5bn) the previous month.
In Chengdu, the capital of the southwestern province of Sichuan, officials are accelerating approvals for home sales and property loans, while easing restrictions on using proceeds from pre-sales. Because cash-strapped developers have become reluctant to make bids for land – which are a key revenue source for municipalities – some cities have begun relaxing rules for land parcel sales.
“Beijing wants to ensure that there’s sufficient liquidity to maintain construction in the property sector,” Janz Chiang, an analyst at Trivium China in Beijing, told Al Jazeera. “But it also doesn’t want a sudden flow of easy credit – the very practice it has been trying to stamp out for years. So, their challenge is to find out where that magic point between sufficient liquidity and preventing a reinflation of the property sector will be.”
Shehzad Qazi, managing director of China Beige Book International, told Al Jazeera there were signs of increased borrowing across the economy as a whole.
“Property firms are actually leading the pace with bond issuances as well,” Qazi said. “Not only are they seeing recovery in lending through banking channels, but they are also clearly being provided the space to sell bonds to plug the holes in their businesses too.”
Qazi said that keeping track of non-bank lenders would be a key indicator of the market’s direction going forward.
“In the third quarter, we saw historic levels of non-bank lending in the sector with 46 percent of all loans taken by property firms coming from shadow lenders such as trust companies or small loan firms,” he said. “The state-controlled banks were not loaning to private companies at all, so they had to resort to non-bank lenders.”
The liquidity crisis at troubled developer Evergrande has raised concerns about the health of China’s property sector [FILE: John Sibley/Reuters]
Nonetheless, Beijing has indicated it will not deviate from its “houses are for living, not for speculation” campaign.
In an essay earlier this month, Vice Premier Liu He said officials should “focus on stabilising land prices, house prices, and stabilise expectations,” in order to “solve household’s housing problems and promote the healthy development of real-estate companies”.
“Top officials have made it crystal clear that they are satisfied with their policies and have also consistently reiterated their intentions to cool the market,” said Chiang.
“While they are most likely to continue with their policy trajectory to cool the property market, we expect some degree of credit control loosening from banks after regulators indicated that their excessive reactions to policies are to blame for the slowdown.”
China’s real estate sector accounts for more than a quarter of the nation’s economy, which officials have cast as a threat to economic stability. Eight of the 10 most-indebted property developers are based in China, and Beijing was aware of the problem of overleveraging even before Evergrande’s debt binge sent investors reeling.
In August 2020, Beijing began restricting borrowing with the “three red lines” policy, which stipulates that developers looking to refinance need to have a 70 percent ceiling on liabilities to assets, excluding advance proceeds from projects sold on contract, a 100 percent cap on net debt to equity, and a cash to short-term borrowing ratio of at least one.
The restrictions have contributed to a fall in new construction, house sales and house prices this year. Growth in real estate investment, which peaked at 38.3 percent in January, dropped to 21.6 percent in April, 10.9 percent in July, and 7.2 percent in October.
“There is the realisation that the former growth model – which involved high levels of debt, high levels of investment, and high levels of growth – doesn’t work anymore,” said Qazi. “Beijing realises that it needs to shift to a more sustainable model, which means a slower pace of growth.”
But Qazi said Beijing appeared to be taking a flexible approach to restructuring the sector.
“Beijing is working with local governments in some 200 cities where Evergrande has unfinished projects,” he said. “They’re creating task forces to evaluate the status of these unbuilt properties and transfer them to new developers so Chinese households are delivered what they’ve paid for. Here the government is adopting a flexible policy vis-a-vis leverage, by allowing for the outstanding debt on these properties to stay off those developers’ balance sheets.”
‘Balanced and sustainable growth’
Sam Xie, head of research at CBRE China, told Al Jazeera that while there were signs banks had expedited loan approvals for reasonable financing needs, he did not expect any major loosening of lending in the near term.
“The policy stance remains that ‘housing is for living in, not for speculation’, and the ‘three red lines’ remain firmly in place to curb excess speculation and overleveraging in the sector,” Xie said.
According to CBRE, Chinese-listed developers will have almost $100bn in corporate bonds expiring in the next two years.
“As such, highly leveraged developers are expected to continue their focus on offloading non-core assets and put off any aggressive expansion plans while the authorities’ emphasis remains on balanced and sustainable growth,” Xie said.
Chiang, the Trivium China analyst, said Beijing’s policy was driven by a long term view of the market.
“Regulators likely believe that once the temporary correction blows over, the sector will be healthier than before, which is precisely what they have been working towards for years,” she said. “Policymakers won’t let this crucial sector starve to death, so some policy rejiggering is possible and looks increasingly probable. We have seen some level of easing up, such as encouraging developers to issue bonds on the interbank market. Still, an all-out U-turn on tight property policy is not in the cards.”
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.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
