Shanghai housing market on fire
Feb-02-2021 By : fcccadmin
Shanghai’s property market blows hot and cold. When the market cools, the government steps in to facilitate home buying; when it gets frothy, the brakes are applied. On January 21, the city government tapped the brakes with a series of new directives. The measures stipulate that couples who have been divorced for three years or less are only eligible to buy homes based on the circumstances that existed when they married. It means, in effect, that if a couple owned two houses before their divorce, then either party will not be allowed to purchase a home within three years of the divorce. Under the city’s current home-purchase restrictions, local families are allowed to purchase two residential units at most, while non-local families are entitled to only one home. Moreover, a capital gains tax on the total sales price of a property will be imposed if the house is sold within five years of purchase, up from the previous two-years.
Under the new policy, homes owned for longer than five years will draw capital gains tax on any profit from their sale if the property is defined a “non-ordinary.” No capital gains tax will be imposed if a residence is deemed “ordinary.” In Shanghai, “ordinary” homes are defined as those no larger than 140 square meters and priced at less than CNY4.5 million within the Inner Ring Road; or below CNY3.1 million if located between the Inner and Outer Ring Roads; or below CNY2.3 million if beyond the Outer Ring Road. The change essentially means a hefty cost increase for homebuyers of existing properties sold within two years but less than five years of purchase because sellers will take capital gains tax into account. “Local authorities are constantly adjusting the policy framework based upon market conditions and feedback to previous measures,” said James Macdonald, Senior Director of Savills Research China. “Some of the policies look to close loopholes misused for speculative investments, while continuing to support first-time buyers.” Shanghai’s residential property market proved resilient last year despite the novel coronavirus pandemic. The market gradually returned to normal in the second quarter after the peak of the outbreak.
In April, for example, the volume of new residential properties sold, excluding government-subsidized affordable housing, jumped 62% from the previous month to 5,286 units in Shanghai.
In the existing housing market, some 25,000 homes changed hands that month, also an increase of 62% from March, according to Shanghai Centaline Property Consultancy Co. For the whole of 2020, 80,300 units of new housing and 301,000 units of existing housing were sold, up 23% and 27%, respectively. “The existing housing segment, which better reflects the real local property market, remained hot in recent quarters, with monthly transactions above 25,000 units since May, reaching a peak of 39,000 units in December,” said Lu Wenxi, Senior Researcher at Centaline, who noted it was the highest volume since 2016. “The city’s accelerated pace of renovating old residential communities and unmet demand from both first-time buyers and people seeking to move up the housing ladder probably contributed to the panic buying,” Lu said. For example, a new residential project in Qiantan, an area dubbed the “second Lujiazui” in the Pudong New Area, had 2,583 prospective buyers vying to purchase 204 fully decorated apartments. “The new policies should be effective in curbing the overheated market in some parts of the city exhibiting signs of property speculation,” said Chen Jie, Director of the Center for Housing and Urban-Rural Development at Shanghai Jiao Tong University, as reported by the Shanghai Daily.
Home foreclosures rise in China as incomes drop
Sep-22-2020 By : fcccadmin
As many as 1.25 million homes were foreclosed in China as of September 16, according to the Taobao e-commerce platform. That is more than double the 500,000 at the end of 2019 and compared with 9,000 foreclosures in 2017.
Deteriorating job prospects and shrinking incomes amid the worst economic contraction in decades combined to weigh down on borrowers’ repayment ability, putting an end to the country’s debt-fueled real estate rally. Nowhere is the problem more serious than in Guangzhou, the provincial capital of Guangdong. As many as 33,000 foreclosures were reported in a city whose economy shrank 2.7% last year, more than the national average of 1.6%. Lisa Fan, a Guangzhou-based lawyer who specializes in bank notices for debt-collection, has seen plenty of these cases. A woman recently approached Fan for help when her beauty salon was forced to be sold after half a year of coronavirus lockdowns. “She owed CNY4 million and needed to pay CNY20,000 each month,” Fan said. “However, she had no income in the first half due to the social-distancing measures to contain the coronavirus outbreak.”
Property foreclosures create a downward spiral effect, as homes used as collateral for loans tend to be avoided by buyers in the second-hand market for fear of containing hidden liabilities, until they can be proven to be fully discharged. “Buyers worry that their property may be involved in complicated legal procedures and will avoid them even if prices have been slashed by 10% to 20%,’” said Midland Realty’s Research Director Fion He. A reason for the increasing number of defaults is the increasing propensity for property buyers to resort to using loans and leverage to finance their purchases, as ever escalating real estate prices put homes beyond the reach of average households. In Shenzhen, the median home price has risen 14.6% so far this year, following last year’s 15% increase, according to data by Lianjia. When buyers’ incomes or businesses suffer, their ability to repay comes under pressure. More sellers are approaching the property agent for urgent sales of their homes because their salaries have been cut, or because they have lost their jobs or businesses, Midland’s He said. Many of them are hoping to cash in on their assets before they fall into default on their mortgage payments, she said.
“During the good times, their homes can appreciate in just a couple months, and they then can borrow more money from banks – more than enough to pay back what they borrowed for down payments and they also can get more for other investments,” He said. “But when black swan events like the Covid-19 pandemic hit, they just cannot survive for even a couple months. It is a fact that the macroeconomic environment is not good and every individual has been hit.”
Banks usually allow a delay of payments for three months and taking the pandemic outbreak into consideration, banks usually can extend the mercy period to six months, said Zach Zhao, who works in a state-owned bank in Tianjin. “There is a dramatic surge of payment delays, and even defaults, of personal loan payments, including credit cards and consumption loans, as people are losing their jobs. But defaults in mortgages are usually the last step as no one wants to lose their homes,” Zhao added, as reported by the South China Morning Post.
Proptech the new buzzword in China’s real estate industry
Aug-25-2020 By : fcccadmin
Proptech is fast becoming the buzzword for the real estate industry in China thanks to its enhanced human experience, operational excellence, safety and health, as well as digital drive, a new report said. Broadly, proptech refers to the application of technology in the property industry. Global real estate consultancy JLL said in a recent white paper that China is witnessing an early-stage development of the proptech ecosystem jointly created by real estate enterprises, technology companies and relevant professional organizations. The constant interaction between real estate and technology companies is going to generate ideas, promote integration, and create value for the sector as a whole.
Proptech also refers to a wide spectrum of digital and technological trends in the real estate industry, including digital business models, smart buildings and smart cities. The white paper – Reimagine the Future of Real Estate – comes at a time when China’s commercial real estate market is facing internal pressure due to intense competition and rising uncertainties. The report, based on responses from over 200 proptech companies and key stakeholders in China, summarizes the application scenarios, technical characteristics and enduser demands of 12 key property technologies, including cloud computing, big data, artificial intelligence (AI), the internet of things (IoT), building information management, virtual reality or augmented reality, indoor navigation, robotics, 5G, blockchain, unmanned aerial vehicles, and autonomous vehicles. KK Fung, CEO of JLL China, said: “Proptech is the key growth engine for the re-imagining of the real estate market. By enhancing the resilience of any commercial property, proptech can mitigate potential market risks and maximize long-term asset values.” The report said proptech empowers a property from four perspectives: human experience, operational excellence, safety and health, and digital drive. The implementation of proptech in a commercial building enhances the capability to respond and mitigate risks for landlords, developers and investors. “Real estate consumption has created several opportunities for technologies to be part of the sector upgrade process,” said Yan Yuejin, Director of Shanghai-based Ehouse China Research and Development Institution.
Proptech investment has grown rapidly during the past five years and hit a record in the first half of 2019. “China is one of the most dynamic markets for proptech in the world. One of the key changes in the commercial real estate sector is the quest for experience services. Flexible spaces, experience services, smart buildings, online listing platforms and brokerages, and space visualization are some of the industry-specific trends that are reshaping the overall landscape of China’s commercial real estate industry, said Jack Woo, head of digital and technology with CBRE North Asia. “Globally, it is still a new concept, but it will have an impact on the property sector and create enormous opportunities,” said Zhang Ying, Managing Director for JLL North China, as reported by the China Daily.
Real estate prices drop during pandemic
Apr-07-2020 By : fcccadmin
Prices for new homes in 23 out of 70 large and medium-sized Chinese cities saw a month-on-month drop in February, compared with 15 in January, the National Bureau of Statistics (NBS) said. As for pre-owned homes, a month-on-month decline in prices was seen in 27 cities, while 14 cities saw growth, most of which was negligible. Beijing prices dropped 0.2%, Guangzhou fell 0.1%, while prices in Shanghai and Shenzhen increased 0.2% and 0.5% respectively. With offline sales offices closed and potential buyers secluded at home, the area of housing sold nationwide decreased 39% year-on-year during the January-February period, while the sales value dropped 35.9%. Many cities, including Wuhan, Hubei province – the epicenter of the coronavirus outbreak – reported zero transactions in February. The outbreak has had a significant influence on the real estate sector due to its dampening of outdoor activities, transportation, consumption, face-to-face commerce, and services.
Li Naichao, Director of the Beijing Residential Real Estate Chamber of Commerce, said most residential complexes have been asking for entrance permits from visitors to control the spread of the virus. This prevented agents and clients from freely seeing apartments with their own eyes. In addition, individual incomes were also affected due to the epidemic, which made clients more cautious regarding major spending decisions, Li said. Slumping transaction prices also shook the confidence of sellers. Newly-released homes on property trading platform Homelink declined 57.7% in the first two months of 2020 compared with 2019. In addition, investment, new projects and land purchases all decreased significantly. Real estate investment was about CNY1.01 trillion in January and February, down 16.3% year-on-year. The area of newly constructed residential buildings declined 44.4% to 75.59 million square meters, and the land purchase area dropped 29.3% to 10.92 million sq m, the NBS said.
Xie Chen, Director of Research at property services firm CBRE China, said that with the decline of sales and the upcoming peak for debt maturity, property developers have accelerated domestic and overseas financing. Related bonds issued in January and February reached about CNY250 billion, the highest in history during the period. China Vanke’s sales dropped 35.1% in February. With the resumption of operations postponed, delivery of some 10,000 residential units in the first quarter was delayed. Sunac China reported an over 30% decline in sales in February. Country Garden announced a more than 49% drop in sales that month. The sales area of Longfor reached 434,000 sq m in February, down over 35% year-on-year, while its sales figure declined 29.9% to CNY7 billion. Over 100 real estate companies went bankrupt from early 2020.
Some property developers boosted their online presence. Evergrande pushed its ads on multiple media outlets – “the biggest ever discount in history: 25%” – in the second half of February. The discount remained at 22% in March. Thanks to the promotion, sales of Evergrande reached about CNY44.73 billion in February, up 108% year-on-year. Live-streaming was also widely used. China Real Estate Information Corp said 143 out of the top 200 property operators initiated “cloud purchasing” services – online consulting, transactions and virtual reality-backed inspections, the China Daily reports.
Despite the challenges, experts believe the impact of Covid-19 on the property sector will be controllable and only short-term, due to sustained strong demand from Chinese consumers. “The sales rebound afterward is very likely to offset the impact,” said Hou Yunchun, former Deputy Director of the Development Research Center under the State Council. Online transactions grew 40% in the first half of March month-on-month, though they’re still 20% less than in 2019, said real estate agency Centaline Property.
Real estate developers’ profit growth slows
Aug-28-2019 By : fcccadmin
The majority of property developers in China reported continuous but slowing profit growth in the first half of 2019. Industry experts said that this means that a stable development trend is emerging in the nation’s real estate market. The net profit of leading real estate company Country Garden increased 41% in the first six months to CNY23.06 billion, compared with the same period of last year, but the growth rate last year was more than 90%. Another leading developer, China Vanke, saw its net profit grow 29.8% in the first half of this year. In the same period, it acquired 54 new projects with a total planned gross floor area of 13.728 million square meters, down by 33%.
About 30 developers so far declared negative growth, including China Evergrande Group, whose net profit is expected to plummet about 49% to approximately CNY27 billion from that of the same period last year, due to the decrease in the floor area of properties delivered in the first half of the year. The company recently also started a sales campaign to stimulate sales, providing a discount of 22% in more than 500 of its property projects nationwide. Last year its discount was limited to 11%.
September and October is a traditionally busy time for property developers. Zhang Dawei, Chief Analyst at Centaline Property Agency, pointed out that the real estate market is still mostly on the rise in terms of profit and scale, but its growth rate is slowing down due to tightening regulatory policies to curb an overheating market and rising financial pressure.
From the beginning of 2019, financing channels for developers have become limited to prevent too much capital flows into the property market. Yan Yuejin, Director of the Shanghai-based E-house China Research and Development Institute, added that property developers are proactively paying off their debts and controlling risks, instead of pursuing aggressive expansion. He predicted that the market would continue its steady development in the second half of the year. Sunac China Holdings, one of China’s five major property developers, expected tightening regulation to cause a gradual drop in land prices from the current relatively high level back to a reasonable one. “People will not be hurried to buy a house,” Sunac Chairman Sun Hongbin said. Sunac reported net profit of CNY10.29 billion for the first half of 2019, up 61.7% compared with the same period one year earlier. Revenue increased 64.9% to CNY76.84 billion year-on-year, the China Daily reports.
Chinese investors are now pumping more money in the French real estate market. More than 14% of properties sold in Paris to non-resident and resident foreigners during the first three months of the year were bought by buyers from China, pushing out Italians as the biggest group of foreign buyers of homes in the French capital. In terms of numbers, British investors are traditionally the most active non-resident foreign buyers in France, but their focus is outside the capital. The 13th arrondissement in Paris has the largest Chinese population in the city.
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