A Bloomberg Intelligence gauge of Chinese developer shares fell 3.3% on Thursday, extending losses from a mid-May high to almost 21%. Sunac China Holdings Ltd. was the biggest laggard with a slump of 12%, while CIFI Holdings Group Co. sank 8.4%.

Real estate stocks have retreated amid skepticism over a broad support package unveiled by the central government on May 17. While investors initially cheered the policies, which include lower down-payment requirements for homebuyers, they have since questioned how useful they will be in reviving demand and addressing a housing inventory glut.

There’s also the concern about the size of the measures. Officials have said that a central bank program would incentivize bank loans worth 500 billion yuan ($69 billion), but that’s a small fraction of the value of China’s vacant apartments.

”The latest sales data show there’s not much improvement in property fundamentals,” said Jeff Zhang, an analyst at Morningstar Inc. “We may need to wait until the end of year to see a narrowing of declines or a rise in monthly sales as a result of the government’s rescue package.”

New-home sales at the 100 biggest real estate companies dropped 33.6% from a year earlier in May, easing from a 45% decline in April, China Real Estate Information Corp. data showed. While the slight month-on-month pickup buoyed property shares earlier this week, worries over the long-term outlook later pushed investors to take profits.

“We only do short-term investment in Chinese property stocks as the industry’s fundamentals are still weak,” said Joy Young, the founder of Shenzhen Infinite Fund Management Co.

As some investors wait for a clearer sales-recovery picture, others are seeking clues on major policy shifts that may be unveiled at the Third Plenary Session in July.

Beijing will likely follow other cities such as Shanghai and Shenzhen in relaxing housing curbs, according to John Lam, an analyst at UBS Group AG. Other possible measures may focus on destocking, he added.

Morningstar’s Zhang expects the Chinese government to be more active on property supports until July’s plenum, “but the room for policy adjustments may be smaller than before, as the May rescue package is already very forceful.”

Source: Bloomberg

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He said the property market has demonstrated significant growth and resilience, with individual property counters experiencing up to 600% growth in share price appreciation.

He said property counters in the stock market have been on the rise from January 2023 to June 2024, with 76 out of 100 on Bursa Malaysia experiencing an increase in share prices.

“(Meanwhile,) 22 counters showed a decrease in share prices, (and) two counters maintained their share prices despite fluctuations,” Nga said in a statement today.

He noted that among the top counters were DPS Resources Bhd, registering 600% growth in share price, UEM Sunrise Bhd, posting a 347% increase and WMG Holdings Bhd, which appreciated by 326% from January 2023 to June 2024.

“This positive trajectory is expected to continue into the second half of 2024. I firmly believe that under the leadership of Prime Minister Datuk Seri Anwar Ibrahim, our property market will have a bright future in the coming years.

“We must work together to enhance our industry’s reputation and increase the confidence level of investors to make the property market even more resilient,” said Nga.

According to the statement, Malaysia’s property market transactions were valued at RM42.31 billion, with more than 89,000 transactions recorded in the first quarter of 2023. In the first quarter of this year, the value of property market transactions hit RM56.53 billion, an increase of RM14.22 billion, with more than 104,000 deals.

“This significant growth indicates that Malaysia’s property market is recovering well and on the rise,” the statement added.

Source: The Sun

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Spillover?

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SEOUL, Dec. 7 (Xinhua) — South Korea’s household assets fell for the first time in over a decade on the back of the property market slump, government data showed Thursday.

The average asset per household amounted to 527.27 million won (398,420 U.S. dollars) at the end of March, down 3.7 percent from a year earlier, according to joint data from Statistics Korea, the Bank of Korea, the Financial Supervisory Service.

It marked the first reduction since relevant data began to be compiled in 2012.

Per-household real asset, such as land and housing, retreated 5.9 percent in the cited period, but the financial asset expanded 3.8 percent.

The average value of residing homes per household tumbled 10.0 percent for the past year amid higher borrowing costs.

The Bank of Korea had left its key rate unchanged at 3.50 percent since January after hiking it by 3.0 percentage points for the past one and a half years.

Of the total household assets, the real asset accounted for 76.1 percent at the end of March, down 1.7 percentage points from a year earlier.

The average asset among households in the top 20-percent income bracket stood at 1,174.58 million won (887,550 dollars), about 6.8 times larger than 172.87 million won (130,630 dollars) in the bottom 20-percent income group.

Asset for those in their 60s or older added 0.9 percent in the cited period, but assets in all other age groups shrank in single digits for the past year.

The average debt per household inched up 0.2 percent from a year earlier to 91.86 million won (69,410 dollars) at the end of March.

Per-household financial debt reduced 1.6 percent, but security deposit for homes advanced 5.3 percent.

Of the total households, the proportion of households with debt came in at 62.1 percent at the end of March, down 1.3 percentage points from a year earlier.

The average debt among households in the bottom 20-percent income bracket surged 22.7 percent to 20.04 million won (15,140 dollars), while debt in the top 20-percent income group rose 0.4 percent to 206.34 million won (155,920 dollars).

Meanwhile, the per-household average income grew 4.5 percent over the year to 67.62 million won (51,100 dollars) in 2022.

Earned income increased 6.4 percent to 43.90 million won (33,170 dollars), and business income climbed 4.0 percent to 12.06 million won (9,110 dollars).

Public transfer income declined 4.8 percent to 6.25 million won (4,720 dollars) last year on lower government grants for small merchants and micro businesses suffering from the COVID-19 pandemic.

The average non-consumption expenditure per household, including tax, social insurance fee and interest payment, expanded 8.1 percent to 12.80 million won (9,670 dollars) in 2022 compared to the previous year.

Interest payment surged 18.3 percent last year, while expenditure for tax and social insurance fee gained 4.1 percent and 8.2 percent respectively.

Source : Xinhua

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Rescue measures intended to coax mainland Chinese to purchase residential property in Hong Kong have failed to woo buyers, as the financial hub’s property market slump deepens.

It comes six weeks after Hong Kong Chief Executive John Lee tweaked official housing policy, lowering purchase duties and weakening disincentives against quick resales.

“My WeChat has been buzzing with inquiries from [Hong Kong-based mainlanders] about the specific [changes], but not a single one is interested in viewing properties,” said a real estate agent surnamed Pan, who has some two decades of experience in Hong Kong.

For the past five years, Pan has focused on so-called Hong Kong drifters, a mostly professional class who plan to be in the city long term and lack permanent residency but may be working toward it. Hong Kong is thought to be home to about 350,000 such people.

On Oct. 25, the chief executive delivered his second policy address, an annual speech that sets the political agenda in the city. Lee adjusted a regime of property controls intended to keep a lid on prices that dates back to the global financial crisis. Two key stamp duties that previously added 30% to a purchase price would be cut in half, he said.

Lee also beefed up talent incentives, announcing certain professionals that move to Hong Kong would not need to pay stamp duty so long as they subsequently obtained Hong Kong permanent residency (HKPR).

For long-term renters from the Chinese mainland, it should all have been good news. But Caixin has found that despite an uptick in the city’s new residential transactions, many still remain hesitant to buy.

“Mortgage rates are too high right now,” said Chen Yuan, a financial services professional who has worked in the city for six years. “There’s no good reason to take out a loan during a property market downturn.” Chen said turbulence in her industry, where her husband also works, was a key factor in their decision to put off buying a house.

Hong Kong’s property market continues to slump as rates rise and capital flees in search of safer investments like fixed deposits. The uncertainty has dented confidence as more potential buyers adopt a wait-and-see posture. A recent UBS report predicts the drop in property prices will reach 5% this year and accelerate to 10% in 2024.

Hong Kong’s property prices remain some of the world’s highest. They rose continuously, with occasional short-term corrections, from the global financial crisis of 2008 up until a historic annual decline in 2022. But the recent shift, and the absence of a sustained post-pandemic bounce, has many investors asking where the market is headed and what a recovery will look like.

Less than expected

Lee’s changes announced in the policy address fell short of market expectations. “This is not even half of what was expected,” said Joseph Tsang, chairman of the Hong Kong branch of global developer giant JLL.

“Over the past year, interest rates have risen significantly, various economies have shown moderated growth and transactions of the local residential property market have declined alongside a downward adjustment of property prices,” Lee said in his address.

He said an expected increase in housing supply in the near term justified easing the measures intended to cool demand. Those measures include three taxes on property sales: the special stamp duty (SSD), the buyer’s stamp duty (BSD) and the new residential stamp duty (NRSD).

Lee said that from Oct. 25 buyers would only need to wait two years before reselling if they wanted to avoid an SSD of 10%. Previously, homeowners were required to wait three years if they wanted to avoid the additional tax.

A continued rise in mortgage rates has discouraged potential buyers from entering Hong Kong’s property market.   © Reuters

Long an attractive place for mainlanders to park their money and hedge against risks closer to home, Hong Kong’s speculative inbound capital had nonetheless come in waves. A key instance was after the 2008 global financial crisis, when quantitative easing made the city’s property market an attractive proposition. The SSD was introduced in 2010 in part to combat that. The BSD followed in 2012 as a tax on purchases by non-HKPRs.

In his October policy speech, Lee also announced that the BSD and NRSD would be cut in half to 7.5%. The change was intended to ease the financial burden of housing purchases on HKPRs and non-HKPRs alike, he said.

Finally, a refundable upfront payment of the BSD and NRSD would be scrapped for “inbound talent,” meaning incoming professionals who eventually obtained HKPR. Lee said this was an “enhancement” of the refund arrangement, introduced last year, under which the cohort did have to pay the duties up front, but were entitled to a refund after they had lived in Hong Kong for seven years and obtained HKPR.

Rosanna Tang, executive director and Hong Kong head of Research at Cushman & Wakefield, said the new stamp duty exemptions for incoming talent were in line with the government’s broader efforts to remove barriers for individuals interested in developing their careers in Hong Kong.

Market carnage

Last year, Hong Kong’s preowned home price index fell 15.6%, with transaction volumes falling nearly 40%. Then, in the first four months of 2023, the property market experienced a rapid recovery after the border reopening with the mainland. From January to April, its preowned house prices rose for four consecutive months.

It would not last. According to data from Cushman & Wakefield, there were less than 9,200 housing sales in the third quarter of 2023, 25% down on the prior quarter and 21% down on the prior year. Edgar Lai, a senior director of valuation and advisory at Cushman & Wakefield in Hong Kong, told press that the third quarter, usually peak transaction season, was the worst he had seen in more than 20 years in the industry.

The strong stock market rebound at the end of 2022 also petered out. Hong Kong stocks have been hemorrhaging since then, disrupting the traditional investment approach of making money on the stock market and investing it in property.

Meanwhile, the continued rise in mortgage rates has discouraged potential homebuyers from entering the market. The U.S. Federal Reserve began a round of successive interest rate hikes from near zero at the beginning in March 2022 to a range of 5.25% to 5.5% in September this year.

Facing the high cost of funds, several major commercial banks in Hong Kong started to raise their prime lending rates for mortgage loans in September 2022. After the latest hike in July 2023, HSBC, Bank of China and Hang Seng Bank currently have a prime rate of 5.875%, representing a cumulative increase of 0.875 of a percentage point. Smaller banks such as Bank of East Asia and Citibank have raised their prime rate to 6.125%.

Meanwhile, Hong Kong’s tourism and retail sectors recovered less than expected following the city’s reopening. Locals cleared out in favor of tourist destinations abroad. Dampened by the sputtering Chinese economy, few inbound tourists replaced them. In the first eight months of 2023, only 20 million tourists visited Hong Kong, less than half as many as in the comparable period of 2018.

Sellers quick to offload

As U.S. interest rates remain high, the interest on Hong Kong dollar fixed deposits continues to rise steadily. Major banks have all raised their three-month fixed deposit rates to 4.5%, with some smaller banks offering more than 5% interest on large fixed deposits.

Timed deposits, which tend to offer lower returns than stocks and bonds and lack flexibility, have become the de rigueur place to park cash from a housing sale.

Meanwhile developers are struggling with unsold inventory. According to data from Centaline Property Hong Kong, unsold inventory of new private residential properties surged to 20,483 units in the third quarter of 2023, reaching a near 20-year high.

In fact, since the second half of this year, the market has seen a number of residential properties at lower prices. In early August, CK Asset Holdings, the property flagship of Hong Kong billionaire Li Ka-shing, sold its Coast Line II project in Yau Tong at a discounted price, causing a stir in the primary market.

Road to recovery

In the six weeks since the changes, the transaction volume of new residential properties has noticeably rebounded, but the downward trend in property prices continues.

Between Oct. 25 and Nov. 25, the transaction volume of new residential properties was up by around 2.8 times month-on-month, reaching 678 transactions, according to Centaline.

Meanwhile, an index for private flats from the Rating and Valuation Department fell by 2.2% month-on-month in October, marking the sixth consecutive monthly decline.

While the uptick in new housing sales may be related to the policy changes, it could also be down to developers aggressively promoting the sale of new properties at low prices, analysts said.

Derek Chan, head of research at Ricacorp Properties, believes low-cost launches by primary developers will continue to put pressure on preowned home prices.

Chan predicts that with a significant inventory of new residential properties, developers will continue to adopt a “quantity before price” strategy with low-priced launches in December. As a result, homeowners seeking to resell will need to do so at lower prices. He expects Hong Kong property prices to decline by 7% for the full year.

Ken Yeung, head of property research at Citi in Hong Kong, predicted that an improvement in economic conditions and interest rate cuts next year could see Hong Kong property prices bottom out in the first half of 2025.

Source : NikkeiAsia

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(Bloomberg) — Country Garden Holdings Co.’s Chair Yang Huiyan says she is “very confident” the company can repair its balance sheet and pledged the founding family’s support for the ailing Chinese property giant.

The path to fix the balance sheet is “very clear and can be achieved,” Yang said at a monthly management meeting held Friday, according to a statement on the developer’s WeChat account. Country Garden “will strive to become a model for the quick recovery” of distressed companies, she added.

Country Garden’s debt struggles have epitomized the property crisis engulfing the country’s economy. The remarks come as China introduces new measures to put a floor under a property market that’s been roiled since the introduction of measures three years ago aimed at cutting the industry’s reliance on debt.

The developer, a poster child of China’s property crisis, defaulted in October for the first time on dollar bonds, and will face a test next week to avoid the same fate on a local note — an outcome that a regulator signaled it’s trying to avoid.

Yang said that Country Garden can maintain “positive assets” for the next ten years “as long as our inventory assets are sold normally.”

Separately, the company said in the statement that it will have three tasks over the next 12 months: ensuring delivery, operation, and credit and it expects to deliver more than 400,000 units in 2024.

Source : BNNBloomberg

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(Yicai) Dec. 6 — A number of cash-rich Chinese distillers and coal miners have started to buy up land and properties in the country amid a sluggish real estate market.

An affiliate of liquor maker Jingpai paid CNY3.5 billion (USD490 million) for a sought-after land plot in Suzhou, eastern Jiangsu province, in October at a premium rate of 15 percent. The company has bought up a lot of property in Nanjing and Suzhou this year and is cooperating with real estate developers to let it operate them.

And coal miner Inner Mongolia Manshi Coal Group splashed out CNY4.1 billion (USD575.8 million) on three luxury apartment buildings in Shanghai. Two other coal producers, Erdos Group and Huineng Group, also recently spent CNY2.6 billion and CNY6.2 billion, respectively, on property in Shanghai.

Now is the time to pick up bargains as the real estate market is still stagnant and there are stimulus policies that should soon take effect, Zhang Hongwei, founder of Jingjian Consulting, told Yicai. Companies with deep pockets can buy up properties with a long-term view. They should look for prime properties in good locations that have a low price, he added.

Whether it is time to bargain hunt or not depends on the situation and it is still necessary to pay attention to market and policy risks when getting involved in real estate because of the volatile nature of the market, said Bai Wenxi, chief economist of IPG China.

Real estate is a capital-intensive industry with a lack of liquidity so investors need to carefully weigh up the pros and cons before they make a decision, he said.

Source : YiCaiGlobal

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Best rental yield

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At some point next year, the issue of home delivery could turn into a social issue and endanger social stability, and Beijing may eventually need to significantly ramp up policy support.

Nomura

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