STOCKHOLM, Sept 15 (Reuters) – For months, Sweden’s government has sought to play down a property crisis that has throttled confidence in the Nordic state, repeating a simple message: While some companies are in trouble, the country is not.
Now Heimstaden Bostad, a $30 billion property investor with swathes of homes from Stockholm to Berlin, is grappling with a multibillion dollar funding crunch, which has rebounded on one of its owners – the country’s biggest pension fund.
That undoubtedly raises the stakes for Sweden, the European nation hardest hit by a global property rout triggered by the steep rise in interest rates last year that abruptly ended a decade of virtually free money.
Sweden is one of Europe’s wealthiest states and the biggest Nordic economy, but it has an Achilles Heel – a property market where banks have lent more than 4 trillion Swedish crowns ($360 billion) to homeowners. Weighed down by these home loans, Swedes are twice as heavily indebted as Germans or Italians.
Earlier this year, the International Monetary Fund flagged Sweden’s historically high household borrowing coupled with debt-driven commercial property firms and their dependence on local banks as a financial stability risk.
The property crisis accelerated this month when pension fund Alecta, which owns a 38% stake in Heimstaden Bostad, said Sweden’s biggest residential landlord needed cash and it may contribute.
Swedbank estimates the current shortfall for Heimstaden Bostad could be roughly 30 billion crowns ($2.7 billion).
Sweden’s financial regulator launched an inquiry into why and how Alecta had invested $4.5 billion in the property giant, in the first place. Its troubled investment accounts for 4% of its funds.
Christian Dreyer, a spokesperson for Heimstaden, said it had made “good progress covering 2024 bond repayments”, and was “not reliant on immediate capital injection for meeting our obligations”.
But he also signaled that the company was open to other support.
GOVT GETS READY
As the property crisis widens, Sweden’s government is readying for action while crossing its fingers that it will not be needed.
Earlier this year, Karolina Ekholm, Director General of Sweden’s Debt Office, said the government had a light debt load and could afford to borrow more to intervene, addressing the possibility of giving credit guarantees or subsidised loans.
One person familiar with government thinking said that while the state was willing to help in principle, it was conscious of the potential political backlash of supporting companies which had taken big risks.
Heimstaden’s Dreyer said it was examining a “potential recapitalisation from existing shareholders” and was confident it could “mitigate financial risk” in part through bank financing but expressed openness to other forms of support.
“While we’re not dependent on external support, we could consider suitable governmental programs if available,” Dreyer said.
In public, the government has sought to play down the crisis.
“There are potential problems that we must keep close eyes on,” Financial Markets Minister Niklas Wykman told Reuters, shortly before Heimstaden Bostad’s problems became public. “We know that rain and snow is coming. But we have shelters.”
“The government is ready to act to secure financial stability if there should be any threats or turmoil,” he said, cautioning that the problems of individual firms did not mean the wider sector was in trouble.
Sweden is among the first European countries to find itself struggling as interest rates climb because much of its property debt is short-term, making it a harbinger for the wider region, where the rising cost of money has also rocked Germany.
Roughly half of Swedish homeowners have floating-rate mortgages, meaning rate hikes quickly trigger higher bills for them.
Its developers, meanwhile, often relied on shorter-term loans or bonds that have to be replaced with pricier credit.
Heimstaden Bostad and other companies such as struggling SBB (SBBb.ST) grew quickly, in part by selling cheap short-term Eurobonds, which has since become tougher.
“We’ve seen a crazy housing boom. We’re not seeing a bust – yet,” said David Perez, a Sweden Democrat lawmaker. “If interest rates continue to rise and it’s coupled with unemployment, that’s what we are afraid of.”
With interest rates still climbing, analysts such as Marcus Gustavsson of Danske Bank, believe the worst is not yet over.
He reckons that Swedish residential property prices have fallen by roughly 10% and that the property market may only be half way through the rout.
“Until recently Swedes were bidding up the price of homes with funny money,” said Andreas Cervenka, author of “Greedy Sweden”, a book examining inequality driven partly by the housing boom.
“With rising interest rates, that funny money has turned into real money and it is painful.”
($1 = 11.1242 Swedish crowns)
Additional reporting by Simon Johnson and Johan Ahlander in Stockholm, Greta Rosen Fondahn in Gdansk, Chiara Elisei in London; Writing by John O’Donnell; Editing by Hugh Lawson
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The company logo of construction company Redrow is pictured on a flag at a new housing development near Manchester northern England, April 7, 2016. REUTERS/Phil Noble/File Photo Acquire Licensing Rights
Sept 13 (Reuters) – Redrow (RDW.L) on Wednesday said it expected its profit to more than halve in fiscal 2024, after the British homebuilder posted a 4% decline in annual earnings that was ahead of estimates as the country’s housing sector battles a pronounced slowdown.
The latest warning from a British housebuilder comes as concerns about Britain’s economy and rising interest rates, which have pushed up mortgage borrowing and dampened buyer demand, have dented housebuilders’ profits and build targets.
Recent measures of Britain’s property market have shown house prices falling at the fastest pace since 2009, and a decline in mortgage loan demand.
Data from the Bank of England, which has raised interest rates 14 times since December 2021 in an effort to tame inflation, showed the value of residential mortgages in arrears jumped to the highest level in seven years in the three months to June.
“Whilst the market did partially recover in spring 2023, the further rise in mortgage rates combined with the cost of living crisis means the market remained subdued,” Chairman Richard Akers said in a statement.
Shares in the company slipped 1.7% in early trade.
“Redrow’s FY23 results provide a reassuring statement. The skew in completions and margins for the start of calendar of 2024 implies we may need to wait for the ‘turn’ in earnings reported, but perhaps that we are nearer the turn in expectation,” analysts at Jefferies wrote in a note.
The FTSE 250 firm forecast profit before tax in the range of 180 million pounds to 200 million pounds ($224.2 million to $249.1 million) for fiscal 2024.
The Wales-based builder, which constructs bigger houses than rival housebuilders and sells them to second or third-time movers, posted underlying profit before tax of 395 million pounds for the full-year ended July 2, compared with company-compiled analysts’ consensus estimates of 367 million pounds.
($1 = 0.8028 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Rashmi Aich and Christina Fincher
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A view of semi-detached homes in Tilbury, southeast England, May 12, 2014. REUTERS/Suzanne Plunkett/File Photo Acquire Licensing Rights
Sept 11 (Reuters) – British homebuilder Vistry (VTYV.L) said on Monday it will shift its entire focus onto its affordable homes business as a slowdown in the country’s broader housing sector intensifies.
Shares in the builder rose about 11% to a more than one-year high of 893 pence in early trade.
British housebuilders are increasingly feeling the pinch from the Bank of England’s 14 consecutive interest rate hikes, which have hit profit margins and demand as buyers cope with elevated mortgage costs and affordability concerns.
Industry gauges, from mortgage approvals to house prices, have fallen in recent months. Mortgage lender Halifax last week reported a 4.6% annual drop in house prices, the fastest pace since 2009.
Vistry has been working with local government authorities and housing associations to build affordable homes and this Partnerships division has outperformed its Housebuilding unit, which operates on similar lines to rival builders.
“The scale of the social need for affordable mixed tenure housing across the country continues to increase and it is clear that Vistry is uniquely positioned as the leader in partnerships housing,” CEO Greg Fitzgerald said in a statement.
The FTSE 250 (.FTMC) firm said it would merge its Partnerships business with the Housebuilding operations by the end of the 2023 fiscal year to focus on this “high-return, capital-light, resilient” affordable-housing model.
“The shift in strategy removes any doubt about Vistry’s mixed model. It focuses the group on a less volatile part of the
housing market where need is very high,” Peel Hunt analysts wrote.
Vistry had bolstered its Partnerships business with its 1.25 billion pounds ($1.56 billion) acquisition of rival Countryside last September.
The company said it would aim to return 1 billion pounds to shareholders over the next three years and intended to launch an initial share buyback programme worth up to 55 million pounds in November.
Vistry, one of the biggest British housebuilders in terms of the number of homes built each year, reported a drop of more than 8% in adjusted pretax profit to 174 million pounds for the six months ended June 30. It reiterated its forecast for annual pretax profit to exceed 450 million pounds.
($1 = 0.7994 pounds)
Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by Rashmi Aich and Louise Heavens
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A man looks at houses for sale in the window of an estate agents in Manchester, Britain, June 22, 2023. REUTERS/Phil Noble Acquire Licensing Rights
LONDON, Sept 7 (Reuters) – British house prices have fallen at the fastest pace since 2009 over the past year, reflecting the increasing impact of higher interest rates, mortgage lender Halifax said on Thursday.
Halifax said house prices were 4.6% lower last month than in August 2022, when they were close to their peak. This compared with a 2.5% annual fall in July and a median 3.45% decline forecast in a Reuters poll.
Prices fell 1.9% in August alone, the biggest monthly fall since November 2022, and also more than the 0.3% poll forecast.
“House prices have proven more resilient than expected so far this year…. However, there is always a lag-effect where rate increases are concerned, and we may now be seeing a greater impact from higher mortgage costs,” said Kim Kinnaird, director at Halifax Mortgages, part of Lloyds Banking Group (LLOY.L).
The Bank of England has raised interest rates 14 times since December 2021, taking rates to 5.25% in August. Governor Andrew Bailey said on Wednesday that rates were now “much nearer” their peak than before, although financial markets still expect a further increase to 5.5% this month and another rise after.
Rival mortgage lender Nationwide reported last week that house prices in August were 5.3% lower than a year earlier.
Official data showed house prices rose 27% between February 2020 and their peak in September 2022, reflecting increased demand for living space during the COVID-19 pandemic, temporary tax breaks and low interest rates over much of that period.
The average property price had now fallen back to levels similar to early 2022 at 279,569 pounds ($349,601), Halifax said, down 14,000 pounds from the peak last year but still around 40,000 pounds higher than before the pandemic.
A Reuters poll of housing market analysts last week showed they expected prices this year to fall 4% and to be unchanged in 2024 before rising 3.3% in 2025.
Imogen Pattison, assistant economist at Capital Economics, said the bigger-than-expected fall in Halifax house prices supported the consultancy’s forecast that house prices would drop a total of 10.5% by mid 2024.
“High mortgage rates will mean demand remains very weak while previously tight supply of second-hand homes on the market is easing,” she said.
($1 = 0.7997 pounds)
Reporting by David Milliken, Editing by Paul Sandle and Emelia Sithole-Matarise
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People walk past a branch of Industrial and Commercial Bank of China (ICBC) in Beijing, China April 1, 2019. REUTERS/Florence Lo/File Photo Acquire Licensing Rights
BEIJING, Sept 7 (Reuters) – Four of China’s major state banks said on Thursday they will start to lower interest rates on existing mortgages for first-home loans, reducing them to levels in place when a home was purchased.
Industrial and Commercial Bank of China Ltd (ICBC) (601398.SS), China Construction Bank Corp (601939.SS), Agricultural Bank of China (601288.SS) and Bank of China (601988.SS), issued separate statements announcing the planned reduction.
The reduction will come into effect on Sept. 25, they said.
Chinese brokerage China International Capital Corp Ltd (CICC) expected the average reduction for first home buyer’s mortgage rates would be 50 basis points (bps), and it could save them about 200 billion yuan ($27.31 billion).
CICC estimated that loans to first home buyers account for about 80%-90% of total outstanding mortgages.
Chinese regulators announced the policy to help homebuyers last week amid several other support measures announced by Beijing in recent weeks amid mounting concerns over the health of the world’s second-largest economy.
The property sector, which accounts for roughly a quarter of the economy, has lurched from one crisis to another since 2021, and contagion fears deepened this month after liquidity stress in leading developer Country Garden (2007.HK) became public.
China’s home loans totalled 38.6 trillion yuan ($5.3 trillion) at the end of June, representing 17% of banks’ total loan books.
Currently, the national floor of first-home loans stands at 20 basis points below the benchmark lending rate 5-year Loan Prime Rate(LPR) – currently 4.2%. Some big cities carry higher floor rates.
The mortgage rate cuts will put more pressure on banks’ margins at a time when the government is expecting them to do more to support the economy. To cushion the impact, banks on Friday cut interest rates on a range of yuan deposits.
($1 = 7.3226 Chinese yuan renminbi)
Reporting by Ziyi Tang and Ryan Woo; Editing by Edwina Gibbs & Simon Cameron-Moore
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A person walks into a Signature Bank branch in New York City, U.S., March 13, 2023. REUTERS/David ‘Dee’ Delgado Acquire Licensing Rights
WASHINGTON, Sept 5 (Reuters) – The U.S. Federal Deposit Insurance Corporation (FDIC) is seeking buyers for the $33 billion commercial real estate (CRE) loan portfolio of failed New York lender Signature Bank, it said on Tuesday.
The majority of the portfolio comprises multi-family properties primarily located in New York City, the regulator said, adding that it would be marketing the asset over the next three months.
The FDIC has been seeking to sell off portions of Signature, one of three larger banks that failed in the spring, since the bank was closed in March after an exodus of depositors seeking higher returns and safer institutions.
Later that month New York Community Bancorp (NYCB.N) agreed to a deal with the FDIC to buy most deposits and certain loan portfolios along with all 40 of Signature’s former branches.
Within the CRE portfolio is about $15 billion of loans secured by residences that are rent stabilized or controlled.
Since the FDIC has a legal obligation to preserve existing affordable housing for lower-income people, the agency said it planned to place all those loans within joint ventures in which FDIC would retain a majority equity interest.
Any winning bidders for those ventures would be responsible for managing and servicing the loans but would have to meet certain requirements to preserve the loans and underlying collaterial, the FDIC said.
New York City and State housing authorities, as well as community groups, are providing input to the FDIC as it begins marketing. The FDIC said it expects to complete any portfolio sales by the end of 2023.
Reporting by Michelle Price and Pete Schroeder
Editing by David Goodman
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BENGALURU, Sept 1 (Reuters) – The recent downturn in global property prices is mostly over with average home prices in major markets now expected to fall less than anticipated at the start of the year and rise into 2024, according to a Reuters poll of property analysts.
Double-digit price falls that the analysts forecast earlier this year due to rising mortgage rates haven’t materialised in full as higher household savings, tight supply and rising immigration limited declines.
Sharply higher mortgage rates, as a result of more than a year of interest rate rises by key central banks, haven’t affected everyone, either.
Many home owners who locked in cheap mortgages during a long period of near-zero rates, particularly in the United States, have decided to stay put. That has restricted supply and housing market activity.
But that’s more bad news for aspiring first-time homebuyers left on the sidelines for years by tight supply and priced out during the COVID pandemic when existing home owners outbid them, pushing up house prices at double-digit annual rates.
The latest poll results – particularly for economies with the fastest house price inflation in recent years such as the U.S., Canada, New Zealand and Australia – challenge the assumption the next move from most central banks will be to cut rates.
Indeed, much of the optimism around the unexpected early stabilisation in these markets has stemmed from speculation interest rates have topped out and that as soon as the first half of next year, they’ll be coming down again.
“Probably over the last two months there has been a little bit too much positive thinking around the impact of a peak rates scenario. I think we haven’t really felt the full impact yet of higher rates. Fixed rate mortgages have meant many owners of property are being kind of shielded from the impacts,” said Liam Bailey, head of research at Knight Frank.
“I think the reality is you’ve got very low supply and house building volumes in most markets because of COVID disruption and supply chain disruption … You’ve also got quite strong demand in most Western markets. The fundamental point is strong demand meets weak supply.”
That was already a serious challenge across global housing markets before the pandemic, which only a few markets like India missed.
The Aug 14-31 Reuters poll of over 130 housing analysts covering property markets in the U.S., Britain, Germany, Australia, New Zealand and India showed analysts broadly upgrading their forecasts for this year and next. China is a notable exception to the optimism.
Average U.S. house prices were forecast to stagnate this year and next. In the May and March polls, 2023 values were forecast to fall 2.8% and 4.5%, respectively.
New Zealand and Canadian home prices, which soared 40-50% during the pandemic, were predicted to fall around 5% this year and then rise about 5% and 2%, respectively, in 2024.
Those were upgrades from the 8%-9% drop expected in 2023 and a 2%-3.4% rise next year in the last poll.
In India, which did not have a pandemic boom, home prices are set to rise steadily over the coming years.
Average prices in the German housing market were forecast to fall 5.6% this year and flatline in 2024. UK home prices will drift down a modest 4% this year with no growth next year, according to the poll.
Affordability is set to remain a problem globally.
Overall, a majority of respondents, 55 of 103, who answered a separate question said purchasing affordability for first-time homebuyers would worsen over the coming year. The remaining 48 said improve.
“Mortgage rates have continued to rise, and that is putting increased pressure on affordability. Sales volume is low, which obscures exactly how bad the pressure is on home prices,” said Brad Hunter of Hunter Housing Economics.
But with demand for housing outstripping supply, average rents were expected to rise and rental affordability to worsen.
A near two-thirds majority of analysts, 65 of 101, who answered an additional question said rental affordability would worsen over the coming year. The remaining 36 said improve.
(For other stories from the Reuters Q3 housing market polls:)
Reporting by Hari Kishan and Sarupya Ganguly; other reporting and polling by Anitta Sunil, Maneesh Kumar, Prerana Bhat, Jonathan Cable, Anant Chandak, Sarupya Ganguly, Indradip Ghosh, Vivek Mishra, Milounee Purohit, Susobhan Sarkar, Devayani Sathyan and Vijayalakshmi Srinivasan; Editing by Ross Finley and Mark Potter
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Unfinished apartment buildings stand at a residential complex developed by Jiadengbao Real Estate in Guilin, Guangxi Zhuang Autonomous Region, China September 17, 2022. REUTERS/Eduardo Baptista/File Photo Acquire Licensing Rights
BEIJING/HONG KONG, Sept 1 (Reuters) – Real estate agents have been calling Daisy Wu non-stop to get her to buy an apartment in the southern Chinese city of Shenzhen, but the 28-year-old said she was too worried about the slowing economy to consider making a purchase.
Wu’s concerns belie a raft of measures rolled out by the Beijing government this week to revive the economy and target the deepening crisis in its massive debt-riddled property sector which has been on the decline since 2021.
The measures include lower mortgage rates for first-time homebuyers, but analysts warn that like Wu, the sentiment among many Chinese is too weak for these moves to put a floor under the world’s largest asset class, where roughly 70% of household wealth is invested.
“The loosening of mortgage rules doesn’t relieve me of any stress,” said Wu, who works for a pharmaceuticals firm. “Companies are laying people off or even shutting down. My boyfriend and I are too afraid to buy.”
The slump in the property market is driven by more fundamental factors than the cost of borrowing, including broader debt worries in the economy, white-collar workers taking pay cuts, and a demographic downturn.
China’s new home prices fell for the fourth month in August, a private survey showed on Friday.
“Although China has cut mortgage rates a few times since 2022, households do not seem to bother,” Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis, said in a note.
Leading developer Country Garden is scrambling to avoid default and fears of contagion to other property firms are mounting, creating an environment that does little to boost buyers’ confidence.
Moody’s said on Thursday it expects a lengthy recovery process for the sector amid lingering concerns that developers would struggle to complete projects as well as due to a slowing economy and high unemployment.
John Lam, head of China and Hong Kong property at UBS Investment Bank Research, expects more easing measures to be announced soon, but still sees property transactions dropping by about 15% in the second half of the year and by another 10% in 2024.
“Country Garden’s evolving credit event may exacerbate weakness in homebuyers’ sentiment” Fitch Ratings said in a note, adding the impact would be larger in smaller cities.
‘NOT ATTRACTIVE’
In Shenzhen and Guangzhou, people who have fully repaid their last mortgage or sold their homes are now eligible for smaller down payments and lower interest rates when they make a new purchase.
For Shenzhen homeowner Tina Zhuo, the new policy is “not attractive” as she does not want to sell her current home in what she calls “a buyers’ market.”
“I’m earning less so I don’t want to risk looking for a better property,” she said.
State-owned company employee Chen Yibo does want to sell his apartment in the smaller southern city of Nanning and buy a more expensive one in Guangzhou, where he works, but he is not finding any buyers.
Without making that sale, he cannot afford to buy. “Even the smaller down payment is too much for me,” he said. “Only lower house prices and subsidies will work for me.”
Wu, the pharmaceuticals worker, was last shown a flat selling for 1 million yuan ($137,697) less than the average price in that district.
“I was told that the price could be lowered by another 200,000 yuan, but we don’t dare to buy it,” she added.
($1 = 7.2623 Chinese yuan renminbi)
Reporting by Liangping Gao in Beijing and Clare Jim in Hong Kong; Additional reporting by Ziyi Tang, Ella Cao and Ethan Wang; Editing by Marius Zaharia and Miral Fahmy
Our Standards: The Thomson Reuters Trust Principles.
Estate agent signs are seen outside residential housing in South London, Britain, August 7, 2023. REUTERS/Alishia Abodunde Acquire Licensing Rights
LONDON, Sept 1 (Reuters) – British house prices in August were 5.3% lower than a year earlier, their biggest annual decline since July 2009 as higher interest rates reduced demand from buyers, mortgage lender Nationwide said on Friday.
Prices dropped by 0.8% in August alone, the largest monthly fall since March, after a 0.3% decline in July, Nationwide’s figures showed.
“The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels,” Nationwide Chief Economist Robert Gardner said.
The Bank of England has raised interest rates 14 times since December 2021 to 5.25%, and financial markets expect another rate increase this month to 5.5%.
Mortgage approvals had been running around 20% below 2019 levels, a trend which looks likely to continue, Gardner said.
Nonetheless, Nationwide expects a “soft landing” for the housing market as it predicted unemployment would not rise above 5% and wages were growing fast in nominal terms.
Speaking later to the BBC, Gardner said this implied a further fall of only 1% or 2%.
However Andrew Wishart, senior property economist at Capital Economics, said he expected house prices had another 5% to fall, taking the total peak-to-trough decline to 10.5%.
“We think the August data marks the start of a significant further drop in house prices,” he said, pointing to weakness in the latest Royal Institution of Chartered Surveyors survey, which shows the most widespread price falls since 2009.
Before they peaked in September 2022, British house prices had surged more than 25% since the start of the COVID-19 pandemic, boosted by greater demand for living space, previously low interest rates and temporary tax incentives.
A Reuters poll of economists and property analysts published on Friday, ahead of the Nationwide data, showed respondents expected house prices to decline 4% in 2023 compared with 2022 – slightly more than the 3% forecast in a similar poll in June. The most pessimistic forecast was for a 10% fall.
The poll showed respondents expected house prices to be unchanged in 2024 and to rise just over 3% in 2025.
Reporting by David Milliken; Editing by Sarah Young and Mike Harrison
Our Standards: The Thomson Reuters Trust Principles.
BEIJING, Sept 1 (Reuters) – China stepped up measures to boost the country’s faltering economy on Friday, with top banks paving the way for further cuts in lending rates and sources saying Beijing plans further action including relaxing home-purchase restrictions.
As part of the support measures, Chinese authorities also reduced the amount of funds institutions need to hold in foreign exchange reserves. The measures cheered investors, and analysts said they should prevent a further downturn in the struggling property sector.
China is grappling with a slowdown that has rattled global markets, with the spotlight now firmly focused on troubled developer Country Garden’s (2007.HK) spiralling debt crisis in a sector that contributes to roughly a quarter of the economy.
As pressure mounts, the authorities have rolled out a series of measures to spur the economy and revive the property market, with steps including the easing of some borrowing rules and a cut to the amount of forex banks must hold as reserves.
The country is set to take further action including relaxing home-purchase restrictions, four people familiar with the matter said.
Regulators including the housing ministry, central bank and financial regulator in coming weeks will implement measures they have been working on over the past few months under State Council guidance, two of the people said.
ANZ’s senior China economist Betty Wang said several nation-wide property easing measures in the past couple of weeks have exceeded market expectations.
“This is the first time since 2021 that China has announced a series of nationwide property easing measures. They will help restore market confidence and prevent the sector from declining further.”
COUNTRY GARDEN TEST
In the near term, however, market sentiment will be swayed by the outcome of a crucial test of investor confidence in Country Garden.
On Thursday, Country Garden delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan ($537 million) private bond until Friday 1400GMT to give bondholders “sufficient time” to prepare for the vote.
The vote is a key hurdle Country Garden faces as it strives to avoid default, with one holder of the developer’s dollar bonds saying if the company cannot extend its domestic debt, it will be unable to service external bondholders.
“This has been a slow-moving car crash,” said the bondholder, who declined to be identified due to the sensitivity of the issue, adding that concerns centred around uncertainty over the broader economy and tensions with Washington.
“Everything they do right now is going to have an impact five to 10 years down the line.”
Coins and banknotes of China’s yuan are seen in this illustration picture taken February 24, 2022. REUTERS/Florence Lo/Illustration/File Photo Acquire Licensing Rights
Country Garden, China’s largest private developer by sales, did not immediately respond to Reuters request for comment.
Stress in the property market has intensified pressure on Beijing to implement supporting measures and fanned concern about the ability of policymakers to arrest a decline in China’s broader economic growth.
China’s new home prices fell for the fourth month in August, according to a private survey on Friday, as the property debt crisis kept confidence at a low ebb despite the string support measures.
DEPOSIT RATES CUT
The central bank said on Friday it would cut the foreign exchange reserve requirement ratio (RRR) by 200 basis points (bps) to 4% from 6% beginning Sept. 15, a move seen aimed at slowing the pace of yuan declines.
The lenders lowering mortgage rates on Friday included Industrial and Commercial Bank of China (601398.SS), China Construction Bank Corp (601939.SS) and Agricultural Bank of China (601288.SS), which cut their deposit rates by between five and 25 basis points, websites from each bank showed. Several midsized banks also announced they will start cutting interest rates on a range of deposits by 10-25 basis points.
The measures helped lift confidence in the market and battered property stocks rallied, with China’s CSI 300 Real Estate Index (.CSI000952) up 2.4% in afternoon trade.
Three sources familiar with the matter told Reuters on Tuesday that major state banks would cut deposit rates as they prepare to lower interest rates on existing mortgages soon.
Starting from Sept. 25, first-time home buyers with mortgages can apply to their banks for a lower interest rate on their existing loans, China’s central bank and financial regulator announced on Thursday.
The deposit rate cuts are the third such cuts within a year, with the scale of cuts bigger than previous rounds in June and in September last year.
Lower deposit rates will partially offset various pressures on banks’ narrowing net interest margins – a key gauge of profitability, said Nicholas Zhu, a banking analyst at Moody’s.
“The impact of the deposit rate cut is material, given that close to three-quarters of Chinese banks’ liabilities are deposits,” Zhu said.
China’s mortgage loans totalled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks’ total loan books.
($1 = 7.2633 Chinese yuan renminbi)
Reporting by Ziyi Tang, Ryan Woo and Wang Jing, additional reporting by Davide Barbuscia in New York; Editing by Anne Marie Roantree and Lincoln Feast
Our Standards: The Thomson Reuters Trust Principles.