WASHINGTON, March 28 (Reuters) – U.S. single-family home prices moderated further on an annual basis in January, which together with declining mortgage rates could pull buyers back into the housing market.
The S&P CoreLogic Case-Shiller national home price index, covering all nine U.S. census divisions, increased 3.8% year-on-year in January, data showed on Tuesday, marking the ninth straight month of decelerating annual home price gains. That followed a 5.6% advance in December.
The moderate rise also reflected last year’s large increase dropping out of the calculation. Monthly prices fell 0.2% in January after adjusting for seasonal fluctuations.
The housing market has been squeezed by the Federal Reserve’s aggressive interest rate hikes to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But mortgage rates have resumed their downward trend, with the Fed last week indicating it was on the verge of pausing further increases in borrowing costs after the collapse of two regional banks caused financial market stress.
“Given the mortgage investor market response since Fed’s March meeting, home price growth may surprise to the upside if mortgage rates remain favorable, especially in light of continued supply constraints,” said Selma Hepp, chief economist at CoreLogic.
“But, ongoing volatility in mortgage rates and fallout from the banking crisis could put a damper on spring home-buying season, particularly if credit tightening impacts mortgage availability and consumer confidence takes another hit.”
Annual house price growth remained strong in the Southeast, with double-digit gains in Miami and Tampa. Solid price increases were also recorded in Atlanta and Charlotte. The South experienced an influx of population as companies offered workers the flexibility to work anywhere during the COVID-19 pandemic.
House prices continued to decline in the West. Annual house prices fell in San Diego, Portland, San Francisco and Seattle. The region experienced rapid house price increases in prior years.
The cooling in overall house price inflation was reinforced by a separate report from the Federal Housing Finance Agency on Tuesday showing home prices climbed 5.3% in the 12 months through January after rising 6.7% in December. House prices rose 0.2% month-on-month after dipping 0.1% in December.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, March 23 (Reuters) – Sales of new U.S. single-family homes increased to a six-month high in February, the latest indication that the housing market could be close to finding a floor after being hammered by higher mortgage rates.
New home sales rose 1.1% to a seasonally adjusted annual rate of 640,000 units last month, the highest level since August, the Commerce Department said on Thursday. January’s sales pace was revised lower to 622,000 units from the previously reported 670,000.
New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They have now increased for three straight months.
Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 650,000 units. The surprise increase came despite mortgage rates rising from early February through early March after mostly dropping since November, according to data from mortgage finance agency Freddie Mac.
Monthly sales rose in the South and West. They fell in the Midwest and plunged 40.0% in the Northeast. Sales were down 19.0% on a year-on-year basis in February.
The housing market has borne the brunt of the Federal Reserve’s aggressive interest rate hikes to tame high inflation, with residential investment contracting for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
But the housing market could be close to bottoming out. Data on Tuesday showed sales of previously owned homes rebounding for the first time in a year in February. Homebuilder sentiment improved for a third straight month in March, while single-family housing starts and building permits rose in February.
Mortgage rates are falling again in tandem with a sharp decline in U.S. Treasury yields following the recent collapse of two U.S. regional banks that sparked fears of contagion in the banking sector. Nevertheless, the housing market is not out of the woods yet. Banks have tightened lending standards, which could make it harder for prospective homebuyers to borrow.
The Fed on Wednesday raised its benchmark overnight interest rate by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs.
The U.S. central bank has hiked its policy rate by 475 basis points since last March from near-zero to the current 4.75%-5.00% range.
The median new house price in February was $438,200, a 2.5% rise from a year ago. There were 436,000 new homes on the market at the end of last month, down from 439,000 in January. At February’s sales pace it would take 8.2 months to clear the supply of houses on the market, down from 8.3 months in January.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, March 21 (Reuters) – U.S. existing home sales rebounded more than expected in February as lower mortgage rates and the first year-on-year decrease in prices in 11 years pulled buyers back into the market, further evidence that the housing market was stabilizing at low levels.
The jump in sales of previously owned homes, which was reported by the National Association of Realtors on Tuesday, was the largest in more than 2-1/2 years and ended 12 straight monthly declines in sales, the longest such stretch since 1999.
The housing market has been the biggest casualty of the aggressive interest rate hikes delivered by the Federal Reserve in its battle to tame high inflation. The surge in sales added to data on housing starts and homebuilder confidence in suggesting that the housing market was probably finding a floor.
“It’s too early to declare the home sales recession over, but the decline in mortgage rates allowed buyers to dip their toes back in the market as did the cheaper prices,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Existing home sales, which are counted at the close of a contract, surged 14.5% to a seasonally adjusted annual rate of 4.58 million units last month. February’s sales likely reflected contracts signed a couple of months back. Mortgage rates decreased from mid-November through early February before rising again. Home sales could fall in March.
Last month, sales increased in all four regions, with the Midwest, West and the densely populated South posting double-digit growth. The bulk of sales were concentrated in the $250,000-$500,000 price bracket.
Economists polled by Reuters had forecast home sales would rebound 5.0% to a rate of 4.20 million units. Home resales, which account for a big chunk of U.S. housing sales, fell 22.6% on a year-on-year basis in February.
Residential investment has contracted for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
The worst is likely over. A survey last week showed the National Association of Home Builders/Wells Fargo Housing Market Index increased for a third straight month in March, though homebuilder sentiment remains depressed. Single-family housing starts and building permits rebounded in February.
Mortgage rates, which in February resumed their upward trend, are falling again in tandem with a sharp decline in U.S. Treasury yields following the recent collapse of two U.S. regional banks that sparked fears of contagion in the banking sector. But the outlook for the housing market remains unclear.
Despite financial market instability, the Fed is expected to raise interest rates by another quarter of a percentage point on Wednesday, according to CME Group’s FedWatch tool.
Financial conditions have tightened, which could cause banks to become more strict in extending credit. That could impact small businesses, who have been the main drivers of job growth, and prospective homebuyers.
“There is still the possibility that tightening lending standards imply that (mortgage) applications for purchase will not directly translate to actual purchases,” said Veronica Clark, an economist at Citigroup in New York. “An upcoming weakening in the labor market would also be a risk to stronger housing demand and prices.”
U.S. stocks were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices fell.
SUPPLY STILL TIGHT
The median existing house price fell 0.2% from a year earlier to $363,000 in February. That was the first annual price decline since February 2012. Prices dropped on a year-on-year basis in the Northeast and West, the most expensive housing regions. They continued to rise in the Midwest and South, which are generally considered more affordable.
The South experienced an influx of people during the COVID-19 pandemic as companies gave workers the flexibility to work from anywhere in the country. Lawrence Yun, the NAR’s chief economist, said there were “stronger sales gains in areas where home prices are decreasing.”
There were 980,000 previously owned homes on the market last month, unchanged from January and an increase of 15.3% from a year ago. At February’s sales pace, it would take 2.6 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.
Given tight supply, a collapse in house prices is unlikely.
Properties typically remained on the market for 34 days last month, up from 33 days in January. Fifty-seven percent of homes sold in February were on the market for less than a month.
First-time buyers accounted for 27% of sales, down from 29% a year ago. All-cash sales made up 28% of transactions compared to 25% a year ago. Individual investors or second-home buyers purchased 18% of homes, down from 19% last February. Distressed sales, foreclosures and short sales represented only 2% of sales, little changed from a year ago.
“The data suggest that there is a bid underneath the market that may limit the decline in home prices unless mortgage rates rise sharply again, and encourage our belief that the eventual drop in home values will only be a moderate one,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Reporting by Lucia Mutikani; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.
BERLIN, March 17 (Reuters) – Volkswagen (VOWG_p.DE) plans to invest in mines to bring down the cost of battery cells, meet half of its own demand and sell to third-party customers, the carmaker’s board member in charge of technology said.
Europe’s biggest carmaker wants its battery unit PowerCo to become a global battery supplier, not just produce for Volkswagen’s own needs, Thomas Schmall told Reuters in an interview.
PowerCo will start by delivering cells to Ford (F.N) for the 1.2 million vehicles the U.S. carmaker is building in Europe on Volkswagen’s electric MEB platform, he said.
Long-term, Volkswagen plans to build enough cells to meet half its global battery needs, with most production capacity located in Europe and North America, according to Schmall.
“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” he said.
The carmaker was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant.
Schmall declined to comment on further locations under consideration or where or when Volkswagen might invest directly in mines, saying the company would not disclose that information until the market was more settled.
“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” he said.
AMBITIOUS ROADMAP
Making or sourcing batteries at a reasonable cost is a key challenge for carmakers like Volkswagen, Tesla (TSLA.O) and Stellantis (STLAM.MI) as they seek to make electric vehicles (EVs) affordable.
Only Tesla has pledged more investment into battery production than Volkswagen, according to a Reuters analysis – though even the U.S. EV maker is struggling to ramp up production and is recruiting Asian suppliers to help.
Few carmakers have disclosed direct stakes in mines, but many have struck deals with producers to source materials like lithium, nickel and cobalt and pass them onto their battery suppliers.
PowerCo, set up last year, is targeting 20 billion euros ($21.22 billion) in annual sales by 2030.
It’s an ambitious roadmap for a unit not yet producing at scale. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain and 2027 in Ontario, Canada.
Still, Schmall is confident the carmaker can expand quickly – and must do so if it wants to build an affordable EV, in which 40% of the costs come from the battery.
Volkswagen released on Thursday the details of a 25,000-euro EV it aims to sell in Europe from 2025.
China’s BYD, which also produces batteries, is far ahead of Volkswagen in the affordable EV race and outsold the German carmaker for the second time in four months in China in February.
REDUCING COSTS
In Volkswagen’s 180-billion-euro five year spending plan, up to 15 billion is earmarked for its three announced battery plants and some raw material sourcing.
The carmaker has so far nailed down raw material supply until 2026 – by which time the German and Spanish plants will be in operation – and will decide in the next few months how to meet its demand from then on, Schmall said in the interview.
It has also ordered some $14 billion in batteries from Northvolt’s Swedish plant.
“Bringing down battery costs further is a challenge,” Schmall said. “We’re using all the instruments with PowerCo.”
Asian producers like CATL, LG Chem and Samsung SDI dominate global cell production, with almost half of planned battery cell capacity in Europe by Asian players.
Half the staff at Volkswagen’s PowerCo are industry veterans from Asia, Schmall said, enabling the battery unit to enter the industry at the top of the learning curve.
($1 = 0.9427 euros)
Reporting by Victoria Waldersee; Editing by Susan Fenton
Our Standards: The Thomson Reuters Trust Principles.
STOCKHOLM, March 15 (Reuters) – For years, Sweden has been warned that its dysfunctional housing market, plagued by under-supply and kept aloft by low rates and generous tax benefits, was a risk to the wider economy.
Now those risks are becoming reality. Households with big mortgages are reining in spending as interest rates rise, and house-builders are pulling the plug on investment, tipping Sweden into recession.
The country is set to be the only EU economy experiencing outright recession this year. The crown is trading at around its weakest level against the euro since the global financial crisis, partly due to housing market worries, making the central bank’s job of curbing inflation more difficult.
“It’s not that no one saw this coming,” Riksbank Governor Erik Thedeen said at the end of February. “The Riksbank has warned about this … for a long time. And now it is clear that it is a problem.”
After years of ultra-low borrowing costs, the pandemic and the Ukraine war have served up a toxic cocktail of high inflation and rapidly rising interest rates to many countries.
But in Sweden, the structural problems rooted in its housing market are magnifying the effects.
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House prices in Sweden have almost quadrupled in the last 20 years, easily outstripping wage growth, boosted by generous mortgage tax relief, almost non-existent real estate taxes and a rental market with limited supply because of tight regulations.
Debt levels are among the highest in the European Union at around 200% of disposable incomes, much of which is mortgage debt. And around 60% of Swedes have floating-rate mortgages, meaning rate increases have an immediate impact on the majority of households.
Banking group Nordea (NDAFI.HE) expects household consumption to fall around 2% in 2023, while the National Board of Housing expects housing starts to fall around 50% in the coming year compared with 2021.
Many home-owners are already struggling with higher mortgage repayments alongside surging food and energy prices – even though the full effects of interest rate rises over the last year have yet to be felt.
Philippa Logan, a single mother of two, bought her 89 square meter (958 square feet) apartment in Ostberga in the south of Stockholm in 2017 and paid off some of the mortgage after getting divorced in 2020.
“However, in the last few months, the interest rate has almost tripled making it almost unaffordable to survive,” Logan said.
“The stress has been indescribable,” she said, adding she had been forced to take on extra work to make ends meet.
The central bank expects further rate increases in the coming months. Markets expect borrowing costs to peak at 4%, up from 3% currently.
“Our forecast is for the Riksbank to raise rates to 3.75 as a peak,” Gustav Helgesson, economist at Nordea said. “I think at that level we are very near some kind of pain threshold for households.”
HOME TRUTHS
The European Commission expects Sweden’s gross domestic product to contract by around 1% this year – the only country in the 27-member bloc likely to see negative annual growth.
Nordea expects GDP to contract by around 2%.
House prices are down around 15% since their peak in spring last year, a bigger drop than during the global financial crisis. Some regions have experienced a fall of as much as 40%, the real estate division of insurer Lansforsakringar said.
While Sweden is not alone in seeing big house price falls, its households are almost uniquely sensitive to interest rate hikes because more than half have floating rate mortgages.
In Germany, for example, most borrowers have fixed mortgages and rising rates have largely been shrugged off.
“No, we don’t have any fear with the mortgages,” said Hannah, a teacher in the city of Bochum, in the west of the country, whose joint mortgage with her partner is fixed at 0.9%.
“We have 15 years to pay back and it was all planned in a way that we could pay back even if interest rates rose,” she said.
In Canada, while debt levels are high, variable rate mortgages only account for about one-third of total outstanding mortgage debt, according to the Bank of Canada.
While some economists predict a mild recession in Canada, the OECD think tank expects the Canadian economy will grow around 1.3% in 2023.
A FIXER-UPPER?
Sweden’s housing problems date back decades, but have proven hard to fix.
Plans to ease rent controls have been fiercely opposed by the political left which believes introducing market forces would increase social division by pricing many people out of desirable areas of Sweden’s cities.
All the main political parties agree an overhaul of mortgage tax relief is needed, but none are prepared to give their rivals a stick to beat them with when elections come around.
Reintroducing a property tax, abolished in 2008, is seen as another sure-fire vote-loser.
Financial regulators have introduced tougher lending practices and tightened mortgage repayment rules. Sweden’s banks are among the most strongly capitalised in Europe – partly as a result of worries about the housing market.
These should prevent falling real estate prices from triggering a financial meltdown as happened in Sweden in the early 1990s.
But Sweden’s economy is likely to remain a hostage to imbalances in the housing market while its structural problems go unresolved.
“It’s up to the politicians to decide whether they want to deal with these problems and, more than anything, when,” Nordea’s Helgesson said. “In the current situation, it is very hard to tackle them.”
($1 = 10.6895 Swedish crowns)
Reporting by Simon Johnson, additional reporting by Maiya Keidan and Fergal Smith in Toronto, Anna Koper in Warsaw and Maria Martinez in Berlin. Editing by Jane Merriman
Our Standards: The Thomson Reuters Trust Principles.
BEIJING, March 15 (Reuters) – China’s embattled property sector made new progress in its climb out of a months-long slump as official data for January-February on Wednesday showed much narrower declines in home sales, developer investment and construction starts.
Home sales by floor area in the first two months of 2023 fell 3.6% from a year earlier, according to data from the National Bureau of Statistics (NBS), compared with a 24% decline for the whole of 2022.
The narrower sales decline followed a rise in new home prices in January, the first uptick in a year, as buyers, while still cautious, found solace in a slew of supportive policies, expectations of more stimulus steps and China’s exit from its crushing zero-COVID regime.
Property investment by developers in January-February was down 5.7% on the same period of 2022, improving on December’s 12% annual slump and a 10% decline for the entire 2022.
Analysts expect property sales to be the first indicator to turn positive soon. They see property investment rebounding in the second half of 2023.
“The figures are a good start to the recovery of the property market for 2023, and will further boost confidence,” said Yan Yuejin, analyst at the E-house China Research and Development Institution in Shanghai.
“Property sales figures are expected to turn from negative to positive in the first quarter of the year, the biggest sign that the property market is recovering.”
An index tracking China’s real estate shares (.CSI931775) rose 1.4% on Wednesday, while Hong Kong-listed mainland property developers (.HSMPI) climbed more than 2.5%.
Sentiment for China’s property sector, for years a pillar of growth in the world’s second-biggest economy, has been crushed by multiple crises since mid-2021, including developers’ debt defaults and stalled construction of pre-sold housing projects.
DEMAND BOOST
The lifting of COVID-19 restrictions late in 2022 and release of funds to developers for ensuring delivery of pre-sold projects would boost demand, said analyst Ma Hong at Zhixin Investment Research Institute.
“Investment by developers, a key indicator of market performance, will likely rise in the second half of the year, meaning not only an overall rebound, but also a substantial improvement in the operating conditions of real estate companies,” Ma said.
New construction starts measured by floor area in January-February fell 9.4% from a year earlier versus a 44% plunge seen in December and a 39% tumble for the whole of 2022.
Developers’ access to funds has also improved. Developers raised 15% less funds in the first two months of 2023 than a year earlier. In all of 2022, their fund raising was down 26% on 2021.
“Real estate companies face a peak period of debt repayment in the first half of the year, and will only have the will and ability to expand their investments once sales and financing have grown,” said Zhixin’s Ma.
The NBS did not release land sales data. In 2022, developers bought 53% less land than in 2021. The bureau did not respond to a Reuters request seeking comment on why the data was not released.
Developers were still under great pressure to reduce their stock of unsold homes, since the quantity had risen, said Liu Lijie, analyst at Beike research institute. But the companies’ confidence in getting financing and in buying land had improved marginally, Liu said.
Around half of the 30-odd Chinese developers listed in Hong Kong have defaulted on or delayed bond payments.
At the beginning of the annual meeting of China’s parliament this month, the government made guarding against risks to top property developers one of its top priorities this year, but added that it would prevent disorderly expansion by developers.
(This story has been corrected to say 26% fall in 2022, not in the same period last year, in paragraph 12)
Reporting by Liangping Gao, Ella Cao and Ryan Woo; Editing by Sonali Paul and Bradley Perrett
Our Standards: The Thomson Reuters Trust Principles.
LONDON, March 10 (Reuters) – The easy-cash era is over and its impact is only just starting to felt by world markets yet to see the end of the sharpest interest rate hiking cycle in decades.
Risks were brought to a fore this week as U.S. tech specialist Silicon Valley Bank was shut by California banking regulators on Friday, sparking a rout in bank stocks. SVB was seeking funds to offset a hit on a $21 billion bond portfolio, a result of surging rates, as customers withdrew deposits.
Central banks meanwhile are shrinking their balance sheets by offloading bond holdings as part of their fight against hot inflation.
We look at some potential pressure points.
1/ BANKS
Bank have shot up the worry list as the SVB rout hit bank stocks globally on contagion fears. European banks slid on Friday after JPMorgan (JPM.N) and BofA (BAC.N) shares fell over 5% on Thursday.
SVB’s troubles stemmed from deposit outflows as clients in the tech and healthcare sectors struggled to raise cash elsewhere, raising questions over whether other banks would have to cover deposit outflows with loss-making bond sales too.
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In February, U.S. regulators said U.S. banks had unrealised losses of more than $620 billion on securities, underscoring the hit from rising interest rates.
Germany’s Commerzbank issued a rare statement playing down any threat from SVB.
For now, analysts saw SVB’s issues as idiosyncratic and took comfort from safer business models at larger banks. BofA noted European banks’ bond holdings have not grown since 2015.
“Normally speaking, banks would not be taking big duration bets with deposits, but with such rapid rate rises it is clear why investors could be worried and are selling now and asking questions later,” said Gary Kirk, partner at TwentyFour Asset Management.
2/ DARLINGS NO MORE
Even after a first-quarter surge in stock prices, higher rates have dampened the willingness to take punts on early-stage or speculative businesses, especially as established tech firms have issued profit warnings and cut jobs.
Tech firms are reversing pandemic-era exuberance, cutting jobs after years of hiring sprees. Google owner Alphabet plans to axe about 12,000 workers; Microsoft, Amazon and Meta are together firing almost 40,000.
“Despite being a rate sensitive investment, NASDAQ has not responded to the implications of interest rates. If rates continue to rise in 2023, we may see a significant sell-off,” said Bruno Schneller, a managing director at INVICO Asset Management.
3/ DEFAULT RISKS
The risk premium on corporate debt has fallen since the start of the year and signals little risk, but corporate defaults are rising.
S&P Global said Europe had the second-highest default count last year since 2009.
It expects U.S. and European default rates to reach 3.75% and 3.25%, respectively, in September 2023 versus 1.6% and 1.4% a year before, with pessimistic forecasts of 6.0% and 5.5% not “out of the question.”
And with defaults rising, the focus is on the less visible private debt markets, which have ballooned to $1.4 trillion from $250 billion in 2010.
In a low rate world, the largely floating-rate nature of the financing appealed to investors, who can reap returns up to the low double digits, but now that means ballooning interest costs as central banks hike rates.
4/CRYPTO WINTER
Bitcoin staged a recovery at the start of the year but was languishing at two-month lows on Friday .
Caution remains. After all, rising borrowing costs roiled crypto markets in 2022, with Bitcoin prices plunging 64%.
The collapse of various dominant crypto companies, most notably FTX, left investors shouldering large losses and prompted calls for more regulation.
Shares of crypto-related companies fell on March 9, after Silvergate Capital Corp (SI.N), one of the biggest banks in the cryptocurrency industry announced it would wind down operations and sparked a crisis of confidence in the industry.
5/FOR SALE
Real estate markets started cracking last year and house prices will fall further this year.
Fund managers surveyed by BofA see China’s troubled real estate sector as the second most likely source of a credit event.
European real estate reported distress levels not seen since 2012 by November, law firm Weil, Gotshal & Manges found.
How the sector funds itself is key. Officials warn European banks risk significant profit hits from sliding house prices, which is making them less likely to lend to the sector.
Real estate investment management firm AEW estimates the sector in UK, France and Germany could face a 51 billion euro debt funding gap through 2025.
Asset managers Brookfield and Blackstone recently defaulted on some debt tied to real estate as interest rate hikes and falling demand for offices in particular hit property values.
“The reality that some of the values out there aren’t right and perhaps need to be marked down is something that everyone’s focused on,” said Brett Lewthwaite, global head of fixed income at Macquarie Asset Management.
($1 = 0.9192 euros)
Reporting by Yoruk Bahceli, Chiara Elisei, Nell Mackenzie, Dhara Ranasinghe, Naomi Rovnick, Elizabeth Howcroft; Graphics by Kripa Jayaram and Vincent Flasseur; Editing by Dhara Ranasinghe and Toby Chopra
Our Standards: The Thomson Reuters Trust Principles.
LONDON, March 10 (Reuters) – British house builder Berkeley Group Holdings Plc (BKGH.L) on Friday reaffirmed its 2023 outlook despite a property-sector slowdown.
The FTSE 100 (.FTSE) developer, which caters to a high-end market, said housing sales since the end of September had been around 25% lower than the first five months of the financial year.
“This is a resilient performance in the context of the market volatility since the end of September and reflects the underlying demand for quality homes in London and the South East,” the company said in a statement.
Britain’s property sector has cooled in recent months, hurt by a dent in demand for new homes that has impacted sales and building targets.
House prices have fallen from the highs hit following the onset of the COVID-19 pandemic, while the number of mortgage approvals for house purchases has slipped to the lowest level since 2009.
However some recent indicators pointed to a slight uptick in the sector, with data from Halifax earlier this week showing an unexpected jump in prices last month, potentially reflecting improvements in mortgage rates and consumer confidence.
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Cobham-headquartered Berkeley maintained its profit forecast of about 600 million pounds ($720 million) for the full year to April 30. It expects pre-tax earnings of at least 1.05 billion pounds for 2024 and 2025 fiscal years.
($1 = 0.8372 pounds)
Reporting by Suban Abdulla and Yadarisa Shabong; Editing by Sonia Cheema and Bradley Perrett
Our Standards: The Thomson Reuters Trust Principles.
HONG KONG, March 7 (Reuters) – Hong Kong, one of the world’s top luxury shopping destinations, is losing its lustre as high-end retail properties go vacant and famous foreign brands reduce exposure to the city in favour of opening new outlets in mainland China.
Glitzy Hong Kong shopping streets once packed with luxury stores that attracted 56 million visitors in pre-pandemic 2019 now have about half of their shop units sitting vacant, according to property management companies.
Rents in Tsim Sha Tsui are down 41% from pre-pandemic levels, according to property firm Cushman & Wakefield (CWK.N), and last year the retail district was displaced as the world’s most expensive shopping real estate by New York’s Fifth Avenue.
Canton Road, the most famous shopping street in Tsim Sha Tsui, has a vacancy rate of about 53%, according to global property company Savills (SVS.L).
“Most luxury retailers don’t think Hong Kong will return to the dizzy levels of 2014 when the market here peaked,” said Simon Smith, Savills’ senior director of research and consultancy in Hong Kong.
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“If you walk around the major shopping areas you won’t see the queues outside luxury boutiques or if you do they are very short,” Smith said.
In place of stores shut by Tiffany, Valentino, Burberry (BRBY.L) and other big brands over the last three years, including in Tsim Sha Tsui, Central and Causeway Bay shopping districts, pharmacies and sports apparel outlets for brands like Adidas (ADSGn.DE) and Sweaty Betty have moved in.
Luxury and big brand retail companies mentioned in the story did not respond to requests for comment.
The store closures came after pro-democracy protests and the crackdown that followed pushed sales into a slump which worsened under nearly three years of stringent COVID rules.
Over that period, Hong Kong suffered around a 30% plunge in overall retail sales compared to 2018 levels, largely due to a tumble in mainland visitors because of travel restrictions. Tourists from greater China are the main driver of Hong Kong’s branded retail and luxury goods market.
Hong Kong retail data doesn’t break out luxury goods separately but the sector was hit hard as China accounted for almost 80% of inbound tourists in 2019. Jewellery, watches, clocks and valuable gifts sales in 2022 at HK$38.8 billion ($4.9 billion), for instance, were less than half their 2018 value.
And while inbound travellers in January tripled from December as COVID restrictions were lifted and travel resumed, arrivals were still only about 10% of 2019 levels.
Morgan Stanley (MS.N) forecast Hong Kong visitor numbers this year will reach just 70% of 2018 arrivals. It estimates retail sales will grow 15%, holding at around 80% of retail trade from the pre-COVID year.
MANY MORE ALTERNATIVES
Many luxury brands expanded in mainland China during the pandemic, opening stores in far-flung locations to reach consumers unable to travel. Tourist destinations such as resort island Hainan and Macau also have become popular alternatives as China sought to develop multiple duty and tax free destinations.
Visitors to Macau in January more than tripled from December, hitting 40% of the level of January 2019. Hainan, which reported visitor growth even during the pandemic, saw arrivals rise 11% between Jan. 8 and Feb. 15 compared to the same period a year earlier, according to the government.
“(Hong Kong) will never be back to the level it was, like a decade ago, when it was the only, I would say, duty free location where Chinese would go,” L’Oreal (OREP.PA) CEO Nicolas Hieronimus told Reuters.
“Now they have many more options.”
Duty free malls in Hainan, where tourists are the main customers, reported an 84% jump in sales in 2021, the latest data from consultancy Bain & Co showed, outpacing the mainland’s average growth rate of 36% in luxury sales for that year.
Hainan also accounted for 13% of China’s domestic luxury spend in 2021 versus 6% pre-pandemic, and tax regulations are set to ease further, allowing more duty-free stores to open.
That helped China’s domestic luxury sales double to 471 billion yuan ($68.8 billion) in 2021 from 2019, according to Bain. That outstripped total Hong Kong retail sales from a peak hit in 2013 at HK$494.5 billion ($63.0 billion), according to the city’s statistics department.
This imbalance in favour of increasing sales in China had big luxury brands opening stores across the country over the last few years, according to filings and company websites.
Hermes (HRMS.PA), with 27 stores in the mainland, opened a new, enlarged store in Nanjing in January, relocating to upscale mall Deji Plaza. It first opened a store in 2010 in the eastern city.
Gucci owner Kering (PRTP.PA) opened nine boutiques in Greater China in 2021; upscale men’s suit maker Brioni opened stores in Chengdu, Wuhan and Shenzhen; jeweller Boucheron opened two mainland stores.
Saint Laurent, another Kering brand, opened its first flagship stores in Shanghai and Beijing in 2019. The group’s jeweller Qeelin has also been expanding in the mainland and opened its largest flagship store in China in Shanghai in 2021.
Despite the increasing investment in the mainland, some are still hopeful about the long-term outlook for Hong Kong as global economies and holiday travel recover.
“Macau is another tax free destination and Hainan is duty free. Yet, you don’t find the breadth and depth of mono-brand stores in Hainan that you can find in Hong Kong,” Luca Solca, managing director for luxury goods at investment management firm Sanford C. Bernstein, told Reuters.
“Hong Kong remains very attractive for Chinese consumers.”
($1 = 6.8510 yuan)
($1 = 7.8498 Hong Kong dollars)
Reporting by Farah Master, Jessie Pang, Anne Marie Roantree, Angel Woo and Donny Kwok in Hong Kong, Sophie Yu in Beijing, and Mimosa Spencer in Paris; Writing by Miyoung Kim; Editing by Tom Hogue
Our Standards: The Thomson Reuters Trust Principles.
DUNTON, England, March 6 (Reuters) – Ford Motor Co’s (F.N) push to use reams of data generated by its vans and trucks – from engines to oil filters or brake pads – to attract more customers in the European and U.S. commercial vehicle market plays out on a 9-metre-long (30 ft) screen at its UK headquarters in Dunton east of London.
During a recent visit by Reuters, that screen showed real-time data from 114,000 vans in Britain so far covered by Ford’s FORDLiive monthly subscription service.
Ford employees were focused on the 98.3% of the vans that were in service – and of those, roughly 8% in need of repairs fairly soon or urgently – but concentrated even more so on the 1.7% vehicles out of action.
The U.S. automaker tracks 4,000 data points via modems it has installed in all commercial vehicles since 2019 – and can warn paying customers of engine problems and basics such as brake pad wear, low oil or diesel additives that are cheap to maintain proactively but expensive to fix if not addressed.
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The automaker has connected all of its UK dealers to its system, so it can arrange repairs and have parts ready for vans before they arrive at a dealership.
Ford, which leads the commercial vehicle market in both Europe and the United States, launched the system in 2021. Hans Schep, European head of Ford Pro, the company’s commercial vehicle business, said it is already close to hitting long-term targets of increasing vehicle “up time” by up to 60%.
Ford estimates that downtime, when a van is out of action, costs an average of 600 pounds ($724) daily per van.
“This has already been a major game-changer,” Schep said.
After a successful test run in Britain, Ford is also rolling out the FORDLiive service in mainland Europe and the United States. The automaker has focused more on its profitable Ford Pro business in Europe than lower-margin mass-market passenger cars.
Ford recently announced engineering job cuts in Europe, but is still hiring software experts for its data services.
Data is a huge battleground for commercial vehicle makers and competition will only intensify with electric models, which are essentially computers on wheels.
Using data to show where vans are, how they consume fuel, how drivers use or misuse them, whether they can skip an oil change, but above all avoiding downtime is becoming as important as the vehicles themselves.
There is also an ongoing fight pitting insurers, leasing companies and car repair shops against carmakers in the European Union over access to connected car data and the vast potential revenue it could generate.
“We plan to grow our leadership position,” said Ted Cannis, chief executive of Ford Pro. “We are going to have many, many more markets that we were not even previously in.”
EASING THE ELECTRIC JOURNEY
Electric vans provide far more data points for Ford and its rivals to work with – including tracking how much range they have left and providing easy, comprehensive charging solutions.
Ford’s Schep said providing that data is crucial for van fleets because according to the automaker’s research, 60% of its corporate customers “are really worried about the journey to electric.”
The UK operations of DHL Express, part of the Deutsche Post DHL Group (DPWGn.DE), has 270 electric Ford E Transit vans with firm orders for 120 more, and is signing up for FORDLiive.
Fleet director Richard Crook said aside from monitoring those vans’ batteries, he wants to tap Ford’s predictive maintenance capabilities.
“We need to get ahead of things and plan maintenance schedules because the vehicle is actually telling you ‘I have a problem,'” Crook said.
Ford rival General Motors Co (GM.N) has also rolled out telematics services including “in-vehicle coaching,” where a voice nicknamed “Karen in the vehicle” coaches drivers against excessive braking, speeding or other bad habits.
Michelle Calloway, director of OnStar Business Solutions at GM, said “Karen” cut fuel use by 30% in 30 days in one customer’s fleet.
“Those are impactful savings scaled across a large fleet,” Calloway said.
Starting with 2024 models, GM will provide a range of OnStar data services free for fleet vehicles. Ed Peper, who heads GM’s fleet sales, said once customers try those services, they are likely to pay for more.
Italian truck, van and bus maker Iveco Group NV (IVG.MI) has around 150,000 connected vehicles using telematics services and has seen a 30% increase in uptime, plus a “single-digit percent” drop in warranty costs so far, said chief technology officer Marco Liccardo.
Liccardo estimates subscription services will generate 40% to 50% of commercial vehicle makers’ profits by 2030 and help franchise dealers survive the shift to electric with fewer parts to service.
“Data will be the oxygen to do that,” Liccardo said.
($1 = 0.8289 pound)
Reporting by Nick Carey in Dunton, England
Additional reporting by Giulio Piovaccari in Milan
Editing by Matthew Lewis
Our Standards: The Thomson Reuters Trust Principles.