LONDON, Jan 26 (Reuters) – Britain’s commercial real estate sector is increasingly feeling the pinch of higher borrowing costs, as investor enquiries declined in the fourth quarter and the outlook for the year ahead worsened, an industry survey showed on Thursday.
The Royal Institution of Chartered Surveyors (RICS) said 83% of respondents to its quarterly commercial property survey thought the market was already in a downturn, up from 81% a quarter before. Almost half considered this downturn to be in its early stages.
RICS said investor enquiries fell across all sectors for the first time since the start of the pandemic, with a net balance of -30 of respondents citing lower investment demand.
Tarrant Parsons, senior economist at RICS, said the investment side of the commercial property market was “significantly affected” by the Bank of England’s (BoE) tighter monetary policy, and that higher borrowing costs were weighing on investor demand and hurting valuations.
The BoE’s Monetary Policy Committee raised its main rate at its last nine meetings and markets have priced in a half percentage point increase to 4% for Feb. 2.
British consumer price inflation was running at 10.5% in December, nearly five times the Bank’s 2% target.
Near-term capital value expectations dropped sharply across the board, and the industrial sector saw the weakest reading since 2011.
“Linked to the rise in government bond yields over the past six months, capital values have pulled back noticeably of late, while expectations point to this downward trend continuing over the near term,” Parsons said.
Looking at the year ahead, average capital values were forecast to fall further in all parts of Britain.
The survey of 940 companies was conducted between Dec. 7 and Jan. 13.
Reporting by Suban Abdulla; editing by David Milliken
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BEIJING/HONG KONG, Jan 13 (Reuters) – Chinese government-linked Xiamen C&D Inc (600153.SS) said on Friday it plans to acquire a 30% stake in home furnishings store operator Red Star Macalline Group (601828.SS) in a deal worth up to 6.3 billion yuan ($938 million).
The transaction, which would involve buying a 29.95% stake from Red Star Macalline’s current controlling shareholder, will require approval from the state asset regulating authority in the city of Xiamen, which controls Xiamen C&D, the company said in a stock exchange filing.
Red Star Macalline in the third quarter of 2022 reported a 8.4% fall in revenue and a 47.3% drop in net profit citing disruption caused by COVID-19 outbreaks to its businesses.
Sluggish new home sales in the world’s second largest economy have hurt demand for home decoration and furnishing, analysts have noted.
Property sales by floor area in January-November fell 23.3% from a year earlier, China’s statistics bureau reported.
For the first nine months last year, Red Star Macalline recorded total liabilities of 76.0 billion yuan versus assets of 133.7 billion yuan.
As for the firm’s controlling shareholder Red Star Macalline Holding Group, a Fitch Ratings report in September said the firm faced “heightened refinancing risks” related to its “large onshore bond maturities” over the coming 12 months.
In July 2021, Red Star Macalline Holding Group agreed to sell 70% stake in a property development unit to an entity linked to Sino-Ocean Group (3377.HK) for 4 billion yuan.
($1 = 6.7147 Chinese yuan renminbi)
Reporting by Roxanne Liu and Kane Wu; editing by Jason Neely
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HOUSTON, Jan 12 (Reuters) – A 3D printer is taking home building to a new level — literally.
The enormous printer weighing more than 12 tons is creating what is believed to be the first 3D-printed, two-story home in the United States.
The machine steadily hums away as it extrudes layers of concrete to build the 4,000-square-foot home in Houston.
Construction will take a total of 330 hours of printing, said architect Leslie Lok, co-founder of design studio Hannah and designer of the home.
“You can actually find a lot of 3D-printed buildings in many states,” Lok said. “One of the things about printing a second story is you require, you know, the machine…And of course, there are other challenges: structural challenges, logistic challenges when we print a second-story building.”
The three-bedroom home with wooden framing is about halfway finished and is being sold to a family, who wish to remain anonymous, she said.
[1/4] A 12-ton industrial 3-D printer is used to print concrete for the first 3-D-printed, two-story home currently under construction in Houston, Texas, U.S., January 3, 2023. REUTERS/Evan Garcia
The project is a two-year collaboration by Hannah, Peri 3D Construction and Cive, a construction engineering company.
Hikmat Zerbe, Cive’s head of structural engineering, hopes the innovative technique can one day help more quickly and cheaply build multifamily homes.
In addition, concrete can withstand the hurricanes, heavy storms and other severe weather in Texas that is becoming more frequent and severe due to climate change.
And since the printer does all the heavy lifting, less workers are needed at the construction site.
“Traditional construction, you know the rules, you know the game, you know the material properties, the material behavior. In here, everything is new,” Zerbe said. “The material is new, although concrete is an old material in general, but 3D printing concrete is something new.”
Read more:
Scientists chip away at how ancient Roman concrete stood test of time
Reporting by Evan Garcia; Editing by Lisa Shumaker
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Nov 28 (Reuters) – China Evergrande Group (3333.HK) said on Monday its unit has entered into a deal to sell a piece of commercial land in Shenzhen for 7.54 billion yuan ($1.05 billion), as the embattled property developer looks to shave off its massive debt.
Evergrande, which has about $300 billion in liabilities, has been at the centre of a deepening property debt crisis in China that has seen multiple developers defaulting on their offshore debt obligations over the past year, prompting many to consider debt restructuring. read more
The company said it will sell the land to Shenzhen Anhe No. 1 Property Development, a unit of Shenzhen Anju Construction Investment and Operation. Real-estate firm China Vanke (000002.SZ) holds a 20% stake in Shenzhen Anju.
Evergrande expects a loss of about 163 million yuan from the disposal of the 10,376.82 square meter landholding located in Shenzhen.
The company said the proceeds from the sale will be used to repay relevant debts in respect of the land, while adding the land did not generate any rental income in 2020 and 2021.
($1 = 7.2095 Chinese yuan renminbi)
Reporting by Jaskiran Singh in Bengaluru; Editing by Shounak Dasgupta and Shinjini Ganguli
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BEIJING, Nov 23 (Reuters) – Three of China’s biggest commercial banks have agreed to provide fundraising support to property developers, including industry giant Vanke (000002.SZ), in a coordinated effort to support the country’s embattled property sector.
It marks one of the latest moves by state-owned banks to respond to Beijing’s call to ease pressure on debt-laden developers and reverse a housing slump.
The property sector makes up about a quarter of China’s economy.
Bank of Communications Co Ltd (BoCom) (601328.SS) said it agreed to provide a 100 billion yuan ($13.98 billion) line of credit to Vanke and a 20 billion yuan line of credit to Midea Real Estate Holding Ltd (3990.HK), two separate statements issued by the bank said on Wednesday.
Under the agreements, BoCom will be likely to offer the two developers property development loans, loans for M&A deals and bond investments.
The agreement is part of BoCom’s efforts to implement 16 measures outlined by Chinese regulators that aim to boost liquidity in the property sector, the bank said in the statements.
“BoCom will continue to fulfill the responsibility of a state-owned bank, (and) accurately promote high-quality economic development with high-quality financial services,” it said.
Also on Wednesday, Agricultural Bank of China Ltd (AgBank) (601288.SS) said it has signed strategic agreements to provide fundraising support to five property companies, including Vanke, Longfor Group Holdings Ltd (0960.HK) and China Resources Land Ltd (1109.HK). The bank did not give further details on the scale of the support.
Bank of China Ltd (601988.SS), also said on Wednesday it agreed to provide a line of credit of up to 100 billion yuan to Vanke.
Vanke is the country’s second-largest developer by sales.
China’s property sector, once a pillar of growth, has slowed sharply this year due to government efforts to restrict excessive borrowing by developers.
The clampdown has triggered falls in property investment, sales and prices, and a growing number of bond defaults. Construction of many housing projects has stalled, scaring away potential home buyers.
Chinese authorities have announced a flurry of fiscal measures recently to ease the developers’ liquidity crisis.
In the latest policy move, China’s central bank will provide 200 billion yuan in loans to six commercial banks for housing completions, according to a deputy central bank official quoted by the state-run Economic Daily on Monday.
In response to Beijing’s policy guidance, more banks are expected to sign agreements with developers to increase real estate loan issuance, said Liu Shui, an analyst at China Index Academy.
Many analysts, however, believe the property market will take a long time to recover.
“(A) broad recovery in new-home sales remains the key for a sustained improvement in developers’ liquidity profiles,” a Fitch Ratings report said on Wednesday.
“We expect no material improvement in the operating environment, as homebuyers’ confidence remains fragile amid weak economic prospects and uncertainty surrounding delivery of pre-sold properties,” the Fitch report said.
($1=7.1531 Chinese yuan renminbi)
Reporting by Ziyi Tang and Ryan Woo; Editing by Muralikumar Anantharaman, Kim Coghill and Jane Merriman
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TOKYO, Nov 21 (Reuters) – Berkshire Hathaway Inc (BRKa.N), run by billionaire Warren Buffett, has raised its stakes in each of Japan’s five biggest trading houses by at least 1 percentage point to more than 6%, regulatory filings showed on Monday, sending shares higher.
The move is line with Berkshire’s statement in 2020 that its investments in the Japanese trading houses were for the long term and the stakes could rise to 9.9%.
Berkshire’s stakes have increased to 6.59% from 5.04% in Mitsubishi Corp (8058.T), to 6.62% from 5.03% in Mitsui & Co Ltd (8031.T), to 6.21% from 5.02% in Itochu Corp (8001.T), to 6.75% from 5.06% in Marubeni Corp (8002.T) and to 6.57% from 5.04% in Sumitomo Corp (8053.T).
The news boosted shares of the five trading houses, led by Mitsubishi and Marubeni, which were up about 2% against a nearly flat benchmark Nikkei (.N225) average.
Takashi Hiroki, chief strategist at Monex, said he was not surprised that Berkshire had bought more shares.
“Trading companies’ high stock prices are associated with high commodities prices, but there’s much more to their businesses than that,” he said. “Their earnings are good and shareholder returns are strong.”
Shares of the five trading houses have risen by double digit percentages since the start of the year, outperforming a 3% drop in the Nikkei average.
Japanese regulatory rules require disclosure within five business days when an investor who owns more than 5% of a listed company raises or cuts a stake by 1 percentage point.
Berkshire’s increased investments in the trading houses come as it bought more than $4.1 billion of stock this month in Taiwan Semiconductor Manufacturing (2330.TW), a rare significant foray into the technology sector by the conglomerate.
Reporting by Makiko Yamazaki and Noriyuki Hirata; Editing by Jamie Freed
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BEIJING, Nov 18 (Reuters) – China’s property sector will remain weak but will see a gradual recovery in 2023, economists said in a Reuters poll, expecting further stimulus measures and looser COVID-19 curbs to support the crisis-stricken sector next year.
New home prices are expected to fall in the first half of next year before rising for the whole of 2023 while sales are seen falling more slowly as the year progresses, according to the 16 analysts and economists polled by Reuters between Nov. 9 to 17.
According to the survey, new home prices are seen falling 0.5% in the first half of 2023, down from a 2.0% growth forecast for that period in a September survey. But prices were expected to rise 1.8% for the full year.
“For 2023, property indexes are expected to see a turning point and consumer confidence will improve with the economy completely stabilised after COVID restrictions ease,” said Li Zongguang, chief economist at China Renaissance Holdings Limited.
“Property measures are expected to strengthen support, which will improve residents’ confidence.”
Woes in China’s real estate market, which accounts for about a quarter of its $17 trillion economy, deepened in October, weighed down by COVID-19 curbs and industry-wide problems. New home prices fell at their fastest pace in over seven years in October and sales slumped for the 15th straight month.
A recent slew of support measures, including loan repayment extensions, aimed at improving liquidity in the property sector has underpinned market sentiment.
But analysts and economists in the poll expected concerns about falling house prices, protracted COVID restrictions, and delays in construction to continue to weigh on demand.
Property sales were seen slumping 5.0% in the first half of 2023, a smaller drop than the 15.0% fall forecast in the September poll. Economists expected a 1.0% slump in sales for the whole of 2023, the survey showed.
Huang Yu, vice president of China Index Academy, expected the market to gradually stabilise as the financing measures boosted confidence, but she did not expect a V-shaped rebound, stressing the need for more policies targeting demand.
“More home purchase support policy is needed,” especially a move to ease some home purchase curbs in major cities, Huang added.
Demand for property took a big hit this past year as many developers lurched from crisis to crisis and halted the construction of apartments as they ran out of money.
Beijing last week eased some of its COVID curbs with officials flagging further fine-tuning of restrictions, raising hopes of a complete reopening after annul parliamentary meetings in the spring of 2023.
Some analysts say average house prices will need to fall by around 20% to 30% to entice demand.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Liangping Gao, Shuyan Wang and Ryan Woo; Editing by Ana Nicolaci da Costa
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HONG KONG, Nov 9 (Reuters) – Chinese property developers’ share prices surged on Wednesday after regulators expanded a financing programme aimed at supporting bond issuance in the crisis-ridden sector.
CIFI Holdings (Group) Co Ltd (0884.HK) soared 40% while Country Garden Holdings Co Ltd (2007.HK) surged 23%. The Hang Seng Mainland Properties Index (.HSMPI) rose 8%.
The National Association of Financial Market Institutional Investors late on Tuesday said it will widen a programme to support about 250 billion yuan ($34.5 billion) worth of debt sales by private firms, including property developers.
The semi-official association under the central bank also said the programme can be expanded further.
“Even though the programme may not actually help developers that much, it’s the message from the central government, showing its determination to stabilise the sector and the economy, that is boosting sentiment,” said Alvin Cheung, associate director of Prudential Brokerage in Hong Kong.
The move comes as cash-strapped property developers struggle to tap sources of funding to finish projects and pay suppliers. Several developers have defaulted on offshore debt obligations in the past year.
More recently, investors have been fretting about the crisis deepening as developers widely believed to have had government backing also missed payments, such as CIFI and Greenland Holdings Corp Ltd (600606.SS).
“We think this is a big step to help ease liquidity for top private developers after recent defaults,” said Jefferies analyst Shujin Chen in a client note.
Still, there will likely be more defaults given weak recovery in property sales, Chen said.
Developers’ offshore U.S. dollar bonds also rebounded. A Seazen 2026 bond was trading at 14.35 cents on the dollar on Wednesday, showed data from Duration Finance, more than 3 cents higher than a day earlier.
Nomura said benefits from the expanded programme are unlikely to be sufficient to resolve developers’ financial woes as prolonged contraction in new home sales may reduce funding sources this year by 3.3 trillion yuan.
The property market continued its slump in October, with private data showing home prices and sales falling, indicating lacklustre sentiment and a bleak outlook amid strict COVID-19 curbs that have rattled consumer confidence.
($1 = 7.2470 Chinese yuan)
Reporting by Xie Yu and Clare Jim; Editing by Edwina Gibbs and Christopher Cushing
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NEW DELHI, Oct 31 (Reuters) – A locally developed genetically modified (GM) mustard variety will help India boost crop yields of one of the main oilseeds and cut vegetable oil imports that cost billions of dollars a year, the country’s top agricultural scientists said on Monday.
The Genetic Engineering Appraisal Committee (GEAC), part of India’s environment ministry, last week granted environmental clearance for indigenously developed GM mustard seeds, paving the way for commercial use of the first GM food crop.
After the GEAC permission, scientists will now carry out the last rounds of trials and demonstrations before letting farmers grow the transgenic mustard variety developed by Deepak Pental, a geneticist and former vice-chancellor of Delhi University.
“There are strong indications to suggest that new hybrid varieties will finally raise yields of mustard,” Trilochan Mohapatra, president of the National Academy of Agricultural Sciences (NAAS), the top research body of farm scientists, told a news conference.
New hybrid GM seeds could potentially raise mustard yields to 3.0-3.5 tonnes per hectare, he said, up from around 1.3 tonnes now.
Mustard, part of the rapeseed family, has the highest oil content among India’s nine main oilseeds, including soybeans and peanuts, but crop yields have stagnated for years.
India, the world’s biggest edible oil importer, meets more than 70% of its cooking oil demand through imports.
In the fiscal year to March 31, 2022, New Delhi spent a record $18.99 billion to import vegetable oils, prompting Prime Minister to voice concerns about India’s rising vegetable oil import bill.
The GEAC has approved GM mustard seeds after a lengthy, foolproof trial and the new variety is safe for the soil, the environment and human health, said K C Bansal, secretary of NAAS.
Bansal said farmers do not need any herbicide to grow GM mustard seeds and weed killers would only be required at time of seed development. He also said lab-altered GM seeds do not pose any threat to honey bees that flock to mustard flowers for nectar.
Activists have said GM mustard would require widespread use of herbicides and pose a threat to honey bees.
Reporting by Mayank Bhardwaj; editing by David Evans
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A woman points at the model of a residential compound by China Vanke as a sales agent introduces the property to the visitors at its showroom during the National Day “Golden Week” holiday, in Dongguan, Guangdong province, China October 2, 2018. REUTERS/Stringer
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HONG KONG, Sept 22 (Reuters Breakingviews) – Big names generate deal interest, but that comes with risks, too. China Vanke (000002.SZ), the biggest private developer by market value in the People’s Republic, is braving both rocky stock markets and the implosion of the mainland real estate sector to spin off its services unit at a valuation of almost $8 billion. That’s well below an earlier price tag, but it is still asking a premium to many peers.
At the top of the price range, residential and commercial property manager Onewo will raise about $790 million in what will be Hong Kong’s biggest initial public offering. A funding round last year valued the group at about $14 billion, per financial publication IFR. Two years ago, similar floats were commanding valuations of up to 27 times expected earnings. Those were better times: a Hong Kong index for the sector has dropped 72% since then.
Onewo will be valued at 17 times 2023 earnings according to IFR, roughly in line with the average of its peers. Look more closely though, and there’s a big split between state-backed firms trading on up to 30 times, and private rivals like Country Garden’s unit on 8 times.
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The pitch for property managers has been sticky revenue — someone has to keep emptying the bins — with titillating talk of fast-growing technology offerings. Onewo follows this pattern with its high-tech unit generating less than 10% of sales. Perhaps that’s why it dropped “Space-Tech” from its official name since its first filing.
More pertinent to its profit however, are the swings in profitability depending on Onewo’s customers. Last year it made a gross margin of 16% overseeing residential properties for its parent, but 4% working for others. For commercial properties, the margins were 20% and 12% respectively. It attributes the gap to $28 billion Vanke’s brand and quality, and the set-up costs for new third-party work. Unless Vanke goes on a building tear again, it’s hard to see Onewo maintaining anything like its recent 28% net profit growth.
Parent Vanke will take some comfort however from other recent listings in Hong Kong. Duty-free operator China Tourism Group (601888.SS), raised $2.1 billion last month, and its shares have risen 13% since, outpacing the wider market. Even so, Onewo doesn’t seem to be making much concession to the tough conditions it faces. In soft markets, that’s a risky ask.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
CONTEXT NEWS
China Vanke is spinning off its property management unit Onewo in a Hong Kong initial public offering that could raise up to $790 million and value the business at almost $8 billion.
At the top end of its price range, at HK$52.7 per share, the deal would value Onewo at 24 times 2022 expected net profits, and 17 times its forecast 2023 numbers, according to financial publication IFR.
The float comes as the mainland property sector is dealing with a cash crunch and a loss of confidence that has led several developers to default with more expected to do so.
Vanke is the latest in a long line of its peers to raise funds from its services business, which looks after residential and commercial properties.
Onewo is expected to start trading on Sept. 29.
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Editing by Robyn Mak and Thomas Shum
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.