A manufacturer works at an assembly line of Vingroup’s Vsmart phone in Hai Phong, Vietnam December 4, 2018. REUTERS/Kham/File Photo Acquire Licensing Rights
HANOI, Dec 8 (Reuters) – Chinese investments in Vietnam have boomed this year in contrast to a slowdown in U.S. spending and trade, official data show, as the world’s two largest economies vie for influence in the strategic Southeast Asian country.
The manufacturing hub stretching along the South China Sea is increasingly a key assembling link in global supply chains that often rely on Chinese components and U.S. consumers.
U.S. President Joe Biden achieved an upgrade of diplomatic relations with the former foe in a visit to Hanoi in September, after a year of intense diplomatic efforts to elevate the United States to the same tier as China in Vietnam’s ranking.
China’s President Xi Jinping will travel to Vietnam next week with the aim of further deepening ties. He may agree to declare that the two countries share a common destiny, diplomats said, which could be interpreted in Beijing as a formal upgrade of diplomatic relations.
It is unclear which symbolic upgrade carries more weight, but in economic terms China appears to have had the upper hand so far, partly as a consequence of U.S. trade policy. Tensions between Washington and Beijing and various U.S.-led sanctions on China in recent years have encouraged Chinese investment in Vietnam.
Registered investment from China and Hong Kong combined rose to $8.2 billion in the first 11 months of this year, according to Vietnam’s official statistics, twice as much as in the same period last year when China had pandemic restrictions, making them the biggest investors in Vietnam.
U.S. registered investment instead has fallen to $0.5 billion this year from $0.7 billion in 2022, making it the 10th largest investor after Pacific offshore centre Samoa and the Netherlands.
Bilateral trade also dropped, as U.S. consumers grappled with a cost-of-living crisis this year and no tariff cuts were agreed during Biden’s visit.
Exports from Vietnam to the United States plunged 15% to $79.25 billion in the first 10 months of the year, Vietnam data show, and U.S. imports fell as well.
In the same period Vietnam’s exports to China increased by 5% to nearly $50 billion, although imports fell as Vietnam largely buys from Beijing components that are assembled for export to Western countries.
Despite strong economic exchanges, relations with China are complicated by disputes over boundaries in the South China Sea. Anti-Chinese sentiment is also common among Vietnamese people, and it leads to frequent protests, including one in 2018 against the creation of special economic zones that could have benefitted Chinese companies.
DE-RISKING
The U.S. diplomatic upgrade came with the White House’s pledges of more investments and easier trade.
“Despite the fanfare during Biden’s visit we have not seen so far a lot materialise,” said Zachary Abuza, professor on Southeast Asian politics at the National War College in Washington DC, noting foreign businesses face significant challenges when investing in Vietnam.
Several Vietnam-based business consultants signalled an increase in U.S. investors’ interest and noted that investment decisions take time to be made.
The parallel boom in Chinese investment, which excluding Hong Kong has nearly doubled this year above pre-pandemic levels to $3.9 billion, is partly explained by companies’ de-risking strategies amid U.S.-China trade tensions, said Kyle Freeman, partner at business consultancy Dezan Shira.
China’s slowdown has also been a factor on investment decisions, said Chad Ovel, partner at Vietnam-focused private equity firm Mekong Capital. “(The) poor short to moderate-term macro outlook in China is motivating Chinese to find investment opportunities outside of their own country.”
Reporting by Francesco Guarascio; Additional reporting by Khanh Vu and Phuong Nguyen; Editing by Jacqueline Wong
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[1/4]U.S. Treasury Secretary Janet Yellen gives a statement to the press during her visit in Mexico City, Mexico December 6, 2023. REUTERS/Daniel Becerril Acquire Licensing Rights
MEXICO CITY, Dec 7 (Reuters) – The U.S. and Mexico agreed on Wednesday to cooperate on stronger screening of investments to reduce national security risks and discussed integrating cross-border payments systems, but U.S. Treasury Secretary Janet Yellen insisted that the moves were not motivated by concerns about China.
The Treasury and Mexican Finance Ministry signed an agreement to exchange information on technical information and best practices as Yellen wrapped up a three-day visit to Mexico City.
The Biden administration is promoting Mexico as a premier investment destination for U.S. supply chains and wants to ensure that it has a robust screening regime in place to handle a growing influx of factory investment.
The effort is aimed at helping Mexico develop a screening body similar to the Treasury-run Committee on Foreign Investment the U.S. (CFIUS), which reviews purchases of American companies by foreign-owned entities and other inbound investments.
“Like our own investment screening regime, CFIUS, increased engagement with Mexico will help maintain an open investment climate while monitoring and addressing security risks, making both our countries safer,” Yellen said in announcing the memorandum of intent with Mexican Finance Minister Rogelio Ramirez de la O.
FENTANYL VS WEAPONS
Yellen’s trip focused on enhancing economic ties and boosting cooperation to stem the flow of the deadly opioid fentanyl to the United States via Mexico, where precursor chemicals from China are often mixed.
Ramirez asked for help in fighting the flow of weapons from the United States into the hands of Mexican criminal gangs that he said often outgun police departments and Mexico’s military.
“On this side of the border we’re doing everything we can to detect and prevent” the shipping of fentanyl to the U.S., he said. “So we have also asked for the same level of cooperation from the U.S. with these (arms) shipments.”
“NEAR-SHORING” BOOM
Mexico is attracting a major influx of manufacturing investments to supply the U.S. market, raising concerns that China or other countries could use it as a back door to get around restrictions on U.S. export controls for sensitive technologies such as semiconductors.
The near-shoring boom brought Mexico $32.2 billion in foreign direct investment in the first three quarters of 2023, close to the full-year 2022 total of $36 billion.
High-profile projects include an estimated $5 billion Tesla (TSLA.O) electric vehicle factory in northern Mexico that has prompted Chinese suppliers to announce plans to invest over $1 billion nearby.
While CFIUS’ increased scrutiny in recent years has sharply reduced Chinese investment in the United States, Yellen said the investment screening talks with Mexico were “not just China-focused.” She said China was welcome to make investments in Mexico to supply the U.S. as long as these could pass national security screenings and meet new tax credit content rules limiting EV battery value chains to 25%.
“If Chinese involvement triggered those rules, which are meant to avoid undue dependence on China, then that’s a no,” Yellen said earlier.
Ramirez, asked whether Mexico was worried increased cooperation with the U.S. would strain its relationship with China, Ramirez said Mexico’s trading relationship with its northern neighbor was “overwhelmingly dominant” and a higher priority than with other countries.
The Treasury and other members of CFIUS, which include the U.S. departments of State, Defense, Homeland Security, and Commerce, regularly work with governments to improve their investment screening, including recently in Europe, Yellen said. More than 20 countries have implemented or enhanced their regimes over the past decade.
PAYMENTS COOPERATION
Yellen said that Treasury and Mexican Finance Ministry officials on Thursday also discussed cross-border payment systems, including possibly integrating them more deeply, which could enhance trade and investment benefits.
Possible deeper integration of the payment systems between the two countries was “not about China,” Yellen said.
Financial cooperation with the U.S. enabled Mexico to look at issues of interest to the country “in particular digital payments and reducing costs to send remittances,” Ramirez said.
Reporting by David Lawder; Additional reporting by Kylie Madry; Editing by Richard Chang
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BERLIN, Dec 6 (Reuters) – Volkswagen must regularly check its operations in China to ensure its supply chains are safe and comply with human rights laws, two of the carmaker’s investors said, after an audit of its jointly owned Xinjiang site found no sign of forced labour.
The demands made by Union Investment and Deka Investment on Wednesday reflect ongoing concerns over Volkswagen’s engagement in the Xinjiang region, where rights groups have documented abuses including forced labour in detention camps.
Beijing denies any such abuses.
The result of the Volkswagen-commissioned audit comes as Germany is carefully recalibrating its relationship with China, its biggest trading partner, to reduce its exposure to a market that is also a systemic rival.
Volkswagen said on Tuesday that the much-anticipated audit, which was carried out by Germany’s Loening Human Rights & Responsible Business GmbH and two Chinese lawyers from a firm in Shenzhen, had found no evidence of forced labour.
Loening, however, noted that the audit had been limited to the site, a joint venture with SAIC Motor (600104.SS), adding the situation in Xinjiang and the challenges in collecting data for audits were well known.
Germany’s Association of Critical Shareholders (DKA), which represents small investors on environmental, social and governance issues, said the audit was raising more questions than it answers.
“If even a single audit … is so difficult, and can only happen without freedom of expression and labour union rights … further audits can hardly be considered an effective measure,” DKA co-managing director Tilman Massa said.
NO ‘ONE-OFF EXERCISE’
A Volkswagen logo is seen on a Volkswagen ID.5 electric car on display at a showroom of a car dealer in Reze near Nantes, France, November 13, 2023. REUTERS/Stephane Mahe Acquire Licensing Rights
While calling the audit a step in the right direction, Henrik Pontzen, who heads sustainability and ESG at Union Investment, said Volkswagen had not yet reached its goal.
“There is still a lot to do: In China, audits must not remain a one-off exercise. A functioning complaints management system must also be established,” he said.
He also said that Volkswagen’s corporate governance, which has drawn criticism from some of its smaller shareholders, remained the Achilles heel of Europe’s top automaker.
Ingo Speich of Deka Investment, which according to LSEG data owns $99 million worth of Volkswagen’s preferred stock, welcomed the results of the audit but demanded more transparency in Volkswagen’s supply chain.
“Investor pressure has worked. VW has followed the example set by BASF (BASFn.DE), which already started audits in China at a very early stage,” he said.
Shares in Volkswagen were up 3.4% to 112.26 euros at 1144 GMT, lifting them to the top of the gainers on Germany’s blue-chip index, with traders pointing to relief after index provider MSCI (MSCI.N) gave it a ‘red flag’ in its social issue category in 2022, prompting some investors to drop the stock.
Volkswagen’s stock market value has halved to 57.6 billion euros in the past two years. Its shares are down 26% year-to-date, underperforming a 37% rise in the STOXX Europe 600 Auto index .
The automaker’s shares trade at just 3 times forward earnings over the next 12 months, down from 8.8 two years ago, which was the highest among its European competitors.
The price-to-earnings ratio, widely used in financial markets to gauge the relative value of stocks, is now below the 5 for the European car sector.
Reporting by Victoria Waldersee; Additional reporting by Josephine Mason; Writing by Christoph Steitz; Editing by Alexander Smith and Mark Potter
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Dec 5 (Reuters) – Ratings agency Moody’s cut its outlook on China’s government credit ratings to negative from stable on Tuesday, in the latest sign of mounting global concern over the impact of surging local government debt and a deepening property crisis on the world’s second-largest economy.
The downgrade reflects growing evidence that authorities will have to provide more financial support for debt-laden local governments and state firms, posing broad risks to China’s fiscal, economic and institutional strength, Moody’s said in a statement.
“The outlook change also reflects the increased risks related to structurally and persistently lower medium-term economic growth and the ongoing downsizing of the property sector,” Moody’s said.
China’s blue-chip stocks slumped to nearly five-year lows on Tuesday amid worries about the country’s growth, with talk of a possible cut by Moody’s denting sentiment during the session, while Hong Kong stocks extended losses.
China’s major state-owned banks, which had been seen supporting the yuan currency all day, stepped up dollar selling very forcefully after the Moody’s statement, one source with knowledge of the matter said. The yuan was little changed by late afternoon.
The cost of insuring China’s sovereign debt against a default rose to its highest since mid-November
“Now the markets are more concerned with the property crisis and weak growth, rather than the immediate sovereign debt risk,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
The move by Moody’s was the first change on its China view since it cut its rating by one notch to A1 in 2017, also citing expectations of slowing growth and rising debt.
While Moody’s affirmed China’s A1 long-term local and foreign-currency issuer ratings on Tuesday, it said it expects the country’s annual GDP growth to slow to 4.0% in 2024 and 2025, and to average 3.8% from 2026 to 2030.
Analysts say the A1 rating is high enough in investment-grade territory that a downgrade is unlikely to trigger forced selling by global funds. The other two major rating agencies, Fitch and Standard & Poor’s, rate China A+, which is equivalent to Moody’s. Both have a stable outlook.
China’s Finance Ministry said it was disappointed by Moody’s decision, adding that the economy will maintain its rebound an positive trend. It also said property and local government risks are controllable.
“Moody’s concerns about China’s economic growth prospects, fiscal sustainability and other aspects are unnecessary,” the ministry said.
STRUGGLING FOR TRACTION
Most analysts believe China’s growth is on track to hit the government’s target of around 5% this year, but that comapres with a COVID-weakened 2022 and activity is highly uneven.
The economy has struggled to mount a strong post-pandemic recovery as a deepening crisis in the housing market, local government debt concerns, slowing global growth and geopolitical tensions have dented momentum.
A flurry of policy support measures have proven only modestly beneficial, raising pressure on authorities to roll out more stimulus.
Analysts widely agree that China’s growth is downshifting from breakneck expansion in the past few decades. Many believe Beijing needs to transform its economic model from an over-reliance on debt-fuelled investment to one driven more by consumer demand.
Last week, China’s central bank head Pan Gongsheng pledged to keep monetary policy accommodative to support the economy, but also urged structural reforms to reduce a reliance on infrastructure and property for growth.
DEEPER IN DEBT
After years of over-investment in infrastructure, plummeting returns from land sales, and soaring costs to battle COVID, economists say debt-laden municipalities now represent a major risk to the economy.
Local government debt reached 92 trillion yuan ($12.6 trillion), or 76% of China’s economic output in 2022, up from 62.2% in 2019, according to the latest data from the International Monetary Fund (IMF).
In October, China unveiled a plan to issue 1 trillion yuan ($139.84 billion) in sovereign bonds by the end of the year to help kick-start activity, raising the 2023 budget deficit target to 3.8% of gross domestic product (GDP) from the original 3%.
The central bank has also implemented modest interest rate cuts and pumped more cash into the economy in recent months.
Nevertheless, foreign investors have been sour on China almost all year.
Capital outflows from China rose sharply to $75 billion in September, the biggest monthly figure since 2016, according to Goldman Sachs.
($1 = 7.1430 Chinese yuan renminbi)
Reporting by Gnaneshwar Rajan in Bengaluru and Kevin Yao in Beijing; Editing by Tom Hogue and Kim Coghill
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View of the Portuguese parliament on the day of the vote on the 2024 state budget bill on final reading amid Prime Minister Antonio Costa’s resignation, in Lisbon, Portugal, November 29, 2023. REUTERS/Pedro Nunes/File Photo Acquire Licensing Rights
LISBON, Nov 29 (Reuters) – Portugal’s parliament on Wednesday extended tax breaks for foreign residents until the end of next year despite criticism that the scheme has stoked housing prices to levels unaffordable to many Portuguese.
Under the extension, applicants must show they have prepared their move to Portugal during 2023, namely through an employment or a housing contract signed by the end of December.
Launched in 2009, the scheme allows people who become residents by spending more than 183 days a year in the country to benefit during a 10-year period from a special 20% tax rate on Portuguese-sourced income derived from “high value-added activities”, such as doctors and university teachers.
Other benefits of the scheme – known as Non-Habitual Resident – include tax exemptions on almost all foreign income if taxed in the country of origin and a 10% flat tax rate on pensions from a foreign source.
It was introduced to attract investors and professionals as Portugal suffered from the financial crisis.
Portuguese citizens who lived abroad for five years or more can also apply.
Prime Minister Antonio Costa promised in October to close the scheme by the end of the year, calling it a “fiscal injustice that is no longer justified”. It was one of the measures included in the draft 2024 budget.
But after Costa’s resignation earlier this month, his ruling Socialist Party backtracked, suggesting it should stay open until the end of next year. The decision was approved on Wednesday in the final vote on the budget bill.
The Socialists said in a statement it was important to “safeguard the legitimate expectations of people who have already made the decision to immigrate or return to Portugal”.
Official data showed that over 74,000 people had benefited from the scheme by the end of 2022. Last year the tax exemptions
cost the state budget more than 1.5 billion euros ($1.65 billion), an annual increase of 18.5%.
($1 = 0.9106 euros)
Reporting by Sergio Goncalves
Editing by Catarina Demony and Gareth Jones
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The trading floor of Norges Bank Investment Management, the Nordic countryÕs sovereign wealth fund in Oslo, Norway, June 2, 2017. REUTERS/Ints Kalnins/File Photo Acquire Licensing Rights
OSLO, Nov 28 (Reuters) – Norway’s $1.5 trillion sovereign wealth fund, the world’s largest, should include private equity investments in its portfolio, allocating up to $70 billion, the country’s central bank recommended on Tuesday.
The Norwegian finance ministry in March asked the executive board of Norges Bank, which manages the fund, to assess whether unlisted shares should be added as an asset class.
Some 3-5% of the fund’s assets could gradually be moved to private equity funds, equivalent to between $40 billion-$70 billion, the central bank said in a statement.
A final decision will be made next year by parliament. It has previously rejected requests by the fund to move assets into private equity, arguing it could be too costly and would hamper the ability to judge its performance on an ongoing basis.
The fund, which invests Norway’s surplus oil and gas revenue abroad, is the world’s biggest single stock market investor, owning some 1.5% of all globally listed shares, and has stakes in more than 9,200 companies.
“Norges Bank considers it a natural evolution of the investment strategy for unlisted equity investments to be permitted on a general basis,” the central bank wrote in a letter to the finance ministry.
“A broader investment universe will provide more investment opportunities and help the fund benefit from a larger share of global value creation than today,” it added.
At the end of September, 70.6% of the fund’s assets were invested in listed stocks, 27.1% in fixed income, 2.2% in unlisted real estate and 0.1% in unlisted renewable energy infrastructure.
By way of comparison, the ten largest investors in private equity had an average of $80 billion invested at the end of 2022, Norges Bank said.
The fund in 2018 sought permission to acquire unlisted shares via private equity funds or by investing alongside such funds, but the then-government rejected the proposal, arguing it would impede transparency and drive up asset management costs.
But in 2022, a government-appointed commission again raised the topic of private equity, arguing that this could allow the fund to invest in promising companies at an earlier stage and thus potentially earn higher returns.
Reporting by Victoria Klesty and Terje Solsvik; Editing by Essi Lehto, Anna Ringstrom, Louise Rasmussen and Jan Harvey
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Mexico’s President Andres Manuel Lopez Obrador speaks during his regular press conference where he said that his government will help Cuba, including providing it with oil, at the National Palace in Mexico City, Mexico October 16, 2023. Mexico Presidency/Handout via REUTERS Acquire Licensing Rights
MEXICO CITY/COPENHAGEN, Nov 24 (Reuters) – A Danish fund will invest $10 billion in a development hub in southern Mexico to produce green hydrogen for ships and to replace fossil fuel use, Mexican President Andres Manuel Lopez Obrador said on Friday.
One of Lopez Obrador’s key infrastructure projects is the development of an industrial corridor connecting the Pacific and Atlantic oceans in Mexico’s poorer south.
“It is a financial economic fund from Denmark, they are going to invest in a development hub (…) $10 billion, because they are going to produce green hydrogen to replace fossil fuels,” the president told a press conference.
In August, Lopez Obrador said that Danish asset manager Copenhagen Infrastructure Partners (CIP) was going to begin construction of a green hydrogen plant in the southern port of Salina Cruz to supply ships with the fuel.
At the time, the president did not mention the size of the investment, and a spokesperson for CIP said on Friday that its plans for Mexico were known.
“We can confirm that we are involved in a large-scale green hydrogen project in the Oaxaca region in Mexico. Further development will take place in collaboration with local authorities and partners,” CIP said when contacted on Friday. “We will provide further updates as the project progresses.”
The CIP spokesperson said they did not know whether Lopez Obrador was talking about the same project on Friday and declined to confirm the sum he cited as its planned investment.
Lopez Obrador, a strong proponent of fossil fuels since taking office in late 2018, said that new vessels around the world will use the green hydrogen obtained through wind and solar energy via electrolysis.
“We are talking about the era of non-pollution, of everything being done to prevent climate change,” the president added, without providing further details on the investment or its timeline.
Denmark’s embassy in Mexico did not immediately respond to a request for comment on the president’s comments.
Reporting by Raul Cortes Fernandez; Additional reporting by Dave Graham in Mexico City and Johannes Birkebaek in Copenhagen; Writing by Brendan O’Boyle; Editing by Alistair Bell
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A gas pump selling E15, a gasoline with 15 percent of ethanol, is seen in Mason City, Iowa, United States, May 18, 2015. Over the past few months, privately held retailers Kum & Go and Sheetz have become the first significant chains to announce plans to start selling E15, 50 percent more than the typical U.S. blend. REUTERS/Jim… Acquire Licensing Rights
Nov 24 (Reuters) – The White House is stalling action on requests by Farm Belt states to allow regional sales of gasoline blended with higher volumes of ethanol after oil industry warnings that the move could cause regional supply disruptions and price spikes, according to two sources familiar with the matter.
The decision underscores concerns within President Joe Biden’s administration over fuel prices, as opinion polls show inflation and the economy as key vulnerabilities for his 2024 re-election bid. In an NBC News poll released on Sunday, just 38% of respondents approved of Biden’s handling of the economy.
Governors from eight Midwestern states – Illinois, Iowa, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin – petitioned the Environmental Protection Agency last year to let them sell gasoline blended with 15% ethanol, or E15, all year, arguing it would help them lower pump prices that soared following Russia’s invasion of Ukraine in February 2022.
The EPA last March issued a proposal that would approve the request by the governors. The agency subsequently missed deadlines to finalize the proposal after oil refiners including HF Sinclair Corp (DINO.N) and Phillips 66 (PSX.N) warned that a patchwork approach to approving E15 sales would complicate fuel supply logistics and raise the risk of spot shortages.
U.S. gasoline typically contains 10% ethanol.
The two sources familiar with the administration’s thinking, speaking on condition of anonymity, said the White House decided to delay action on the matter following the oil industry’s warnings in part because of concern that higher pump prices in certain states could hurt Biden’s re-election chances.
White House and EPA officials declined to comment on the matter.
Ethanol, a domestically produced alternative fuel most commonly made from corn, is cheaper by volume than gasoline. Adding more of it to the fuel mix can lower prices by increasing overall supply. But the U.S. government restricts sales of E15 gasoline in summer months due to environmental concerns over smog.
The ethanol industry for years has pushed to lift the restrictions on E15 sales nationwide, arguing the environmental impacts have been overstated.
Nebraska and Iowa sued the EPA in August for missing its statutory deadlines on the request by the governors. In its October response, the EPA did not deny it that missed the deadlines and did not offer an explanation.
The oil and ethanol lobbies have produced dueling studies that show how allowing E15 in some states would impact prices, with predictable results. Oil industry-backed studies showed price increases, while ethanol industry-backed studies showed any price increases offset by utilizing lower-cost ethanol.
University of Houston energy economist Ed Hirs said the average U.S. consumer does not understand oil markets, leaving the White House and Biden’s re-election campaign vulnerable to accusations that approving the requests by the governors caused fuel prices to spike, even if something else was to blame.
“There is an unwritten rule that high gas prices mean the incumbent won’t get re-elected,” Hirs said.
Reporting by Jarrett Renshaw and Stephanie Kelly; Editing by Will Dunham
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Apartments are illuminated inside residential buildings at the bank of Berlin-Spandauer-Schifffahrtskanal in Berlin, Germany, November 10, 2023. REUTERS/Lisi Niesner/File Photo Acquire Licensing Rights
BENGALURU, Nov 24 (Reuters) – German home prices will fall more than previously thought this year and next as high interest rates sap demand, according to analysts in a Reuters poll who expect the supply of affordable homes to worsen and ownership to decline in years ahead.
Once-booming property prices in Europe’s largest economy have declined over 10% since they peaked last year as the European Central Bank hiked interest rates by 450 basis points in just 15 months, ending an about decade-long era of rock-bottom borrowing costs.
Those high interest rates and elevated living costs through soaring inflation in recent years have not only forced many households to choose renting over owning a home, it has also led to the worst crisis in the German property sector in decades.
With some German property developers filing for insolvency, construction activity has dropped over a third from a year ago.
The median view from the Nov. 15-23 Reuters poll of 14 property experts forecast average home prices to drop 8.0% this year and 2.8% next, steeper than the predicted 5.6% fall in 2023 and no growth in 2024 in an August survey.
“Higher interest rates forced about half of all potential buyers out of the housing market … and therefore will lead to price reductions in the German housing market in this and the next few years,” said Sebastian Schnejdar, senior real estate analyst at BayernLB.
“Moreover, there was a significant rise in the overheads for heating, electricity and communal fees, which have also increased the costs of housing for homeowners.”
That bleak outlook was despite the government recently announcing a 45 billion euro ($47 billion) support package for the property sector and measures to encourage house building, including tax incentives.
With overall economic activity expected to remain weak over the coming quarters, it could take a while for the property sector to recover.
The euro zone’s commercial property sector could also struggle for years, posing a threat to the banks and investors who financed it, the ECB said recently.
LAND OF TENANTS
Although 11 of 14 analysts who replied to an extra question said purchasing affordability for first-time homebuyers would improve over the coming year, 10 of 14 contributors said the supply of affordable homes would worsen over the coming 2-3 years.
Meanwhile, more are moving into rented homes, putting pressure on the market and rents are rising faster than salaries.
In the capital, Berlin, where cheap apartments were abundant as recently as a decade ago, the vacancy rate is less than 1%.
The median view of 12 property experts forecast average home rental prices to rise 4.0% or more until 2026.
Still, the proportion of home ownership to renters will decrease over the coming five years, according to 11 of 14 analysts. Three said it would increase.
“In the era of low interest rates, home ownership in Germany had become more popular but even if compared with most other European countries, Germany remains the land of tenants,” said Carsten Brzeski, global head of macro at ING.
“Looking ahead, the new (higher) interest rate environment will make it impossible for more people to buy property. As a result, the trend of the last decade from tenants to landlords is over. Moreover, immigration should push up the demand for rental properties.”
(For other stories from the Reuters quarterly housing market polls
Reporting by Indradip Ghosh; Polling by Purujit Arun, Rahul Trivedi and Sarupya Ganguly; Editing by Ross Finley and David Evans
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Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland walk holding the 2023-24 budget, on Parliament Hill in Ottawa, Ontario, Canada, March 28, 2023. REUTERS/Patrick Doyle/File Photo Acquire Licensing Rights
OTTAWA, Nov 21 (Reuters) – Following are some of the commitments the Canadian government made in its Fall Economic Statement released on Tuesday.
*invest an additional C$15 billion in new loan funding, starting in 2025-26, for the Apartment Construction Loan Program, for a total of more than C$40 billion in loan funding. This investment will support more than 30,000 additional new homes, bringing the contribution to more than 101,000 new homes supported by 2031-32.
*invest an additional C$1 billion over three years, starting in 2025-26, for the Affordable Housing Fund. This investment will support non-profit, co-op, and public housing providers to build more than 7,000 new homes by 2028.
*help remove barriers to internal labor mobility, including by leveraging federal transfers, and other funding, to encourage provinces and territories to cut the red tape that impedes the movement of workers, particularly in construction, health care and child care
*deny income tax deductions for expenses incurred to earn short-term rental income, including interest expenses, in provinces and municipalities that have prohibited short-term rentals. It will also deny income tax deductions when short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements.
*propose to spend C$50 million over three years, starting in 2024-25, to support municipal enforcement of restrictions on short-term rentals.
*introduce a new Canadian Mortgage Charter, which outlines how financial institutions are to work to provide tailored relief and ensure payments are reasonable for borrowers.
*the Canadian Radio-television and Telecommunications Commission will conduct a prompt investigation of international mobile roaming charges, and will provide an update and concrete next steps in 2024.
*work with the Canadian Transportation Agency to ensure that airlines seat all children under the age of 14 next to their accompanying adult at no extra cost
*explore removing the rule that restricts Canadian pension funds from holding more than 30% of the voting shares of most corporations. It also proposes to require large federally-regulated pension plans to disclose the distribution of their investments, both by jurisdiction and asset-type per jurisdiction, to the Office of the Superintendent ofFinancial Institutions
*begin buying up to C$30 billion of Canada Mortgage Bonds, starting as early as February 2024
(Reporting by Steve Scherer and David Ljunggren)
(steve.scherer@thomsonreuters.com; +1-647-480-7889)
Keywords: CANADA BUDGET/FACTBOX
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