GUILIN, China, Sept 26 (Reuters) – For six months, home for Ms. Xu has been a room in a high-rise apartment in the southern Chinese city of Guilin that she bought three years ago, attracted by brochures touting its riverfront views and the city’s clean air.
Her living conditions, however, are far from those promised: unpainted walls, holes where electric sockets should be and no gas or running water. Every day she climbs up and down several flights of stairs carrying heavy water bottles filled with a hose outside.
“All the family’s savings were invested in this house,” Xu, 55, told Reuters from the Xiulan County Mansion complex, her room bare except for a mosquito net-covered bed, a few necessities and empty bottles on the floor. She declined to give her full name, citing the sensitivity of the matter.
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Xu and about 20 other buyers living in Xiulan County Mansion share a makeshift outdoor toilet and gather during the day at a table and benches in the central courtyard area.
They are part of a movement of home buyers around China who have moved into what they call “rotting” apartments, either to pressure developers and authorities to complete them or out of financial necessity, as numerous cash-strapped builders halt construction amid the country’s deep real estate slump.
Shanghai E-House Real Estate Research Institute estimated in July that stalled projects accounted for 3.85% of China’s housing market in the first half of 2022, equivalent to an area of 231 million square metres.
While some local governments have taken steps to prop up the property market by setting up bailout funds, buyers like Xu, who paid deposits in advance and are on the hook for mortgages, remain in limbo.
MORTGAGE STRIKES
The proliferation of unfinished apartments has sparked unprecedented collective disobedience, fuelled by social media: in late June, thousands of home buyers in at least 100 cities threatened to halt mortgage payments to protest stalled construction.
The overall property market is highly sensitive to cases of unfinished apartments because 90% of new houses bought in China are purchased “off plans” while still under construction, said Yan Yuejin, research director at Shanghai E-House.
“If this issue is not resolved, it will affect property transactions, the government’s credibility, and it could exacerbate the developers’ debt problems,” he said.
China’s deep property slump, along with disruptions caused by strict anti-COVID measures, are dragging on the world’s second largest economy just as the ruling Communist Party gears up for its once-in-five-years Congress next month.
‘CRASHING FROM PARADISE’
Xu bought her two-bedroom, 70 square metre flat in early 2019, about a year after its developer, Jiadengbao Real Estate, started construction and began marketing apartments for around 6,000 yuan ($851) per square metre, which they said would come with facilities such as floor heating and a shared swimming pool.
Work progressed quickly at first, with blocks in the planned 34 tower complex going up one after another.
But in June 2020, Jiadengbao Real Estate hit the headlines after a court accused its parent company of illegal fund-raising and seized 340 million yuan worth of its properties, including a number of flats in Xiulan County Mansion.
Construction stopped in mid-2020, which Xu found out months later, describing her feelings at the time as “crashing from paradise”.
Jiadengbao Real Estate did not respond to a request for comment from Reuters.
Since the debt crisis erupted in 2021, thousands more home buyers have been caught in similar predicaments as cash-strapped developers went into bankruptcy or abandoned struggling projects.
FENCING AND UNDERGROWTH
On a recent day, the main block of buildings at Xiulan County Mansion was surrounded by a tall blue fence while the clubhouse, touted in promotional materials, was covered in a dense undergrowth. Cement mixers, iron poles, and piles of debris lay strewn around.
Xu, who is unemployed, said she bought the apartment for her only son, with the hope that he would be able to raise a family there. She said her son and her husband, who live far away in the northern province of Hebei, blame her for their financial predicament, and no longer speak to her.
“We don’t know how long we will have to live here because the government has not said anything officially,” she said.
She hopes the Guilin government will step in to help.
The city government did not respond to a request for comment from Reuters.
Housing authorities in Baoding, the northern city where Xu is from and where Jiadengbao Real Estate’s parent company is registered, said last November the city government and Communist Party committee had set up a group to resolve the issue.
“If the government really wants to protect people’s livelihoods, and resume construction, we will go back home,” Xu said.
(This story corrects name of expert in paragraph 9 to Yuejin)
($1 = 7.0508 Chinese yuan renminbi)
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Reporting by Eduardo Baptista and Xiaoyu Yin; Additional reporting by Beijing newsroom and Xihao Jiang; Editing by Lincoln Feast.
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(HOUSTON) – Hines, the global real estate investment, development, and property manager, today announced a partnership with Forbes Travel Guide to define five-star hospitality standards at Hines buildings, making it the first commercial real estate firm to work with Forbes Travel Guide on a global scale.
Hines and Forbes Travel Guide will co-develop custom service standards for the firm’s 415 global office and multifamily properties, and emphasize how hospitality-inspired service can bring greater value to tenants and residents. As commercial real estate standards rapidly change, and people seek more collaborative, creative, and curated spaces, the partnership signifies Hines’ commitment to creating a consistent customer experience that scales with the firm and brings the company’s culture to life.
“Real estate owners and managers have typically prioritized asset value over experience. We’re seeing the value in both ROI and ROE, or return on experience, and see it as the most important metric of tomorrow,” said Whitney Burns, vice president of global client strategy at Hines. “Enhanced customer experience driven by five-star standards not only increases asset value, but helps people feel more valued, connected, and inspired in our spaces. We selected Forbes Travel Guide because they are the trusted partner of the world’s leading hospitality brands and share our passion for creating meaningful experiences for clients.”
In addition to the co-created service standards, the partnership between Hines and Forbes Travel Guide will include a substantive training program encompassing both in-person training customized to the Hines portfolio and scalable online training. The new service standards will be implemented in 2023.
Creator of the original Five-Star rating system, Forbes Travel Guide is the only independent, global rating agency for the hospitality industry. With over 60 years in the hospitality sector, Forbes Travel Guide is the global authority on five-star service, providing world-class, professional development resources to many of the world’s most beloved hospitality brands including the Mandarin Oriental Hotel Group, Marriott International, Hilton Worldwide Hotels & Resorts, as well as other organizations that make exceptional service a pillar of their business model.
“Now, more than ever before, people are emphasizing the experience and purpose behind where they choose to spend their time. Our partnership with Hines is a testament to the firm’s commitment to innovation and placemaking and signifies a new industry standard in the operation of commercial real estate,” said Hermann Elger, Forbes Travel Guide CEO.
About Hines
Hines is a privately owned global real estate investment firm founded in 1957 with a presence in 285 cities in 28 countries. Hines oversees investment assets under management totaling approximately $90.3 billion¹. In addition, Hines provides third-party property-level services to 373 properties totaling 114.2 million square feet. Historically, Hines has developed, redeveloped or acquired approximately 1,530 properties, totaling over 511 million square feet. The firm currently has more than 198 developments underway around the world. With extensive experience in investments across the risk spectrum and all property types, and a foundational commitment to ESG, Hines is one of the largest and most-respected real estate organizations in the world. Visit http://www.hines.com for more information.
¹Includes both the global Hines organization as well as RIA AUM as of December 31, 2021.
About Forbes Travel Guide
Forbes Travel Guide (“FTG”), the global authority on genuine Five-Star service, provides world-class professional services to the hospitality industry and other service-oriented businesses such as luxury retail, residential, healthcare and private clubs through bespoke training solutions, evaluation services and custom service standards. Started as Mobil Travel Guide in 1958, the company created the first Five-Star rating system in the United States. Today, in addition to providing professional services, FTG is the only independent, global rating system for luxury hotels, restaurants and spas. FTG’s prestigious annual Star Awards can only be earned through the company’s objective, in-person inspection process. For more information on FTG services, please visit partner.forbestravelguide.com.
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.
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HONG KONG, Sept 22 (Reuters) – Hong Kong’s finance chief said on Thursday he does not see a sharp risk to the city’s real estate market nor a need to adjust property control measures, as the financial hub braces for more interest rate hikes.
Finance Secretary Paul Chan was speaking after the Hong Kong Monetary Authority raised its base rate charged through the overnight discount window by 75 basis points to 3.5%, its highest since October 2008, following the same move by the U.S. Federal Reserve. read more
Chan said that while home prices in Hong Kong have dropped close to over 6% in the first eight months as rising rates hurt sentiment, the property market depends on many factors including employment and the repayment capability of homeowners.
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“I don’t think there’s a risk of a sharp adjustment,” he said. “The market transactions are low, but there’s no need to adjust control measures.”
Current measures include stamp duties on non-Hong Kong citizens and second homebuyers.
Hong Kong banks, which have lagged their U.S. equivalents in raising rates in recent months, are expected to increase their best lending rate as soon as Thursday, the first increase since 2018.
Official data showed Hong Kong private home prices in July dropped to the lowest since February 2020, as homebuyers turned more bearish due to rising interest rates and an uncertain outlook.
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Reporting By Clare Jim and Donny Kwok; Editing by Anne Marie Roantree, Christian Schmollinger and Kim Coghill
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WASHINGTON, Sept 21 (Reuters) – U.S. existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates and stubbornly high house prices, though the pace of decline moderated from prior months.
The Federal Reserve’s aggressive monetary policy tightening, marked by oversized interest rate increases, has significantly weakened the housing market. In contrast, other sectors of the economy, like the labor market, have shown incredible resilience despite the Fed’s attempts to cool demand.
“High prices and Fed rate hikes will likely remain constraints for sales going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
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Existing home sales slipped 0.4% to a seasonally adjusted annual rate of 4.80 million units last month, the National Association of Realtors said on Wednesday. Discounting the plunge during the spring of 2020 when the economy was reeling from the first wave of COVID-19, this was the lowest sales level since November 2015.
Sales rose in the Northeast and West, but were unchanged in the densely populated South. They fell in the Midwest, which is generally considered a more affordable housing region.
Economists polled by Reuters had forecast sales decreasing to a rate of 4.70 million units. The smaller-than-expected decline was likely the result of contracts signed in July, when mortgage rates retreated after sharp increases. While the NAR hoped that sales would stabilize around current levels, that is unlikely as mortgage rates are likely to push higher.
The Fed is expected to raise its policy rate by 75 basis points later on Wednesday for the third time in as many policy meetings. Since March, the U.S. central bank has lifted that rate from near zero to its current range of 2.25% to 2.50%.
The 30-year fixed mortgage rate averaged 6.02% last week, from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
Though house price growth has slowed as demand weakened, tight supply is keeping prices elevated. The median existing house price increased 7.7% from a year earlier to $389,500 in August. House prices typically slow in July and August. They surged to a record high of $413,800 in June.
There were 1.28 million previously owned homes on the market, unchanged from a year ago.
At August’s sales pace, it would take 3.2 months to exhaust the current inventory of existing homes, up from 2.6 months a year ago. A five-to-seven-month supply is viewed as a healthy balance between supply and demand. The improvement is mostly because sales are weakening.
Properties typically remained on the market for 16 days, up from 14 days in July, but down from 17 days last August. Before the pandemic 30 days on the market was the norm. Eighty-one percent of homes sold were on the market for less than a month.
First-time buyers accounted for 29% of purchases, unchanged from July and a year ago. All-cash sales made up 24% of transactions, up from 22% from a year ago. Prior to 2020, cash sales accounted for only 20% of transactions.
The NAR attributed the higher cash sales share to people needing loans to buy a home dropping out of the market.
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Reporting by Lucia Mutikani; Editing by Andrea Ricci
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Property estate agent sales and letting signs are seen outside an apartment building in Lichfield, Britain, May 3, 2022. REUTERS/Andrew Boyers
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Sept 21 (Reuters) – Shares in British homebuilders rose sharply on Wednesday morning after a media report said the government would cut stamp duty – a tax on property purchases – in a mini-budget on Friday.
Such a move would be a major fillip for the housing sector, which has shown signs of cooling this year amid rising inflation and interest rates.
The UK housebuilders’ index (.FTNMX402020), which has lost more than 43% so far this year, rose 4.1%.
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FTSE 100 stocks Barratt (BDEV.L), Persimmon (PSN.L), Taylor Wimpey (TW.L) and Berkeley (BKGH.L) climbed between 3.2% and 6%, among the top percentage gains on the blue-chip index.
CMC Markets analyst Michael Hewson said housing stocks were getting a boost from the report in the Times newspaper, but added rising interest rates and the worsening cost of living were offsetting factors.
“It can’t hurt but the devil will be in the detail,” Hewson added.
Peel Hunt analyst Sam Cullen said any stamp duty cut could help housebuilders better offset inflation in building costs, which has been largely cushioned by higher house prices.
The Times said the plan to cut stamp duty would be part of new Prime Minister Liz Truss’s drive to boost economic growth. https://bit.ly/3xFQCbn
The report did not specify the size of the cut and Reuters could not immediately verify the news.
A temporary stamp duty cut was used to support the market by previous finance minister Rishi Sunak during the COVID-19 pandemic.
Currently, no stamp duty is paid on the first 125,000 pounds ($141,650) of any property purchase.
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Reporting by Aby Jose Koilparambil and Yadarisa Shabong in Bengaluru; Editing by Savio D’Souza and Mark Potter
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Men work at the construction site of the Beijing Xishan Palace apartment complex developed by Kaisa Group Holdings Ltd in Beijing, China, November 5, 2021. REUTERS/Thomas Peter
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HONG KONG, Sept 21 (Reuters Breakingviews) – Foreign bondholders in Chinese property developer Kaisa (1638.HK), which is starting to default on $12 billion of offshore credit, are offering up to $2 billion to take over stalled housing projects plus restructure debt. A similar proposal failed last year, but as its woes worsen, Kaisa may reconsider. Pricing is the trick.
As with most holders of dollar bonds issued by Chinese developers, Kaisa’s investors are in a tough position. The Shenzhen-based company has not published its 2021 annual report, so there’s little insight on its current financial condition. Its shares have been halted since April, and its bonds are trading at as low as 10 cents per dollar. Their backs against the wall, the group is proposing to take a 20% haircut on the dollar notes plus inject equity capital. In addition, they want to buy bad loans tied to its unfinished housing developments at a discount between 20% and 25%, per Reuters read more , then take over the collateral and complete the projects.
This is the second such attempt. After Kaisa defaulted on a $400 million note in December, bondholders offered read more to buy up to $1 billion of its bad loans, but Kaisa’s banks shrugged the offer off. After all, Kaisa was the first Chinese real estate company to default on dollar debt during a mini real estate crash in 2015, yet Chairman Kwok Ying-shing managed to turn the company around while clinging onto control.
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But this crisis looks more serious than 2015. Credit ratings agency Moody’s estimates property sales could contract another 20% by next June. Kaisa’s sales slumped 80% in the first eight months this year, per Chinese consultancy CRIC.
Local governments are under increasing pressure from Beijing to ensure private developers’ stalled housing projects pre-sold to buyers are delivered to avoid social unrest. read more But their budgets are constrained by dwindling revenue from land sales, which fell 32% year-on-year during the first seven months of 2022. State-owned asset managers and lenders are constrained by capital adequacy and leverage requirements. That should make all of them more open to the group’s pitch this time around.
The debate will be over the discount. Many of the distressed projects appear to be in attractive locations, making them easier to sell once completed, but such projects are often secretly pledged as collateral multiple times and loaded with hidden debts. This deal may get further than the last one, but that doesn’t mean it will close.
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CONTEXT NEWS
An offshore bondholders’ group of Shenzhen-based Chinese property developer Kaisa is offering up to $2 billion to buy some non-performing loans from Kaisa’s lenders, tied to unfinished housing projects, at a 20%-25% discount, plus provide the financing needed to complete the projects, Reuters reported on Sept. 19 citing unnamed sources.
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Editing by Pete Sweeney 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.
A construction site is seen at a residential area in Tokyo, Japan, August 21, 2016. Picture taken on August 21, 2016. REUTERS/Kim Kyung-Hoon
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TOKYO, Sept 20 (Reuters) – Japanese land prices rose in the 12 months to July 1 for the first time since before the pandemic, thanks to easing of measures to control COVID-19, an annual land ministry survey showed on Tuesday.
The data highlighted continued harm that border controls are inflicting on Japan’s tourism industry, at a time when the government is signalling further reopening to attract foreign visitors. read more
Overall property prices in the world’s third-largest economy were 0.3% higher on July 1 than a year earlier, following a 0.4% decline in the year to July 1, 2021, and a 0.6% fall in the 12 months before that, the survey showed.
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“Last year’s drop was due overwhelmingly to the impact of the pandemic, and this time land prices have recovered from there,” a land ministry official told a media briefing.
Prices of residential land, which had fallen for the previous 31 years, marked a slim 0.1% rise in the 12 months to July 1, following a 0.5% decrease in the year before, the survey showed. The ageing and decline of Japan’s population have driven the long-term descent in residential land value.
Commercial property prices rose faster, by 0.5%, reversing a 0.5% drop of the previous year thanks to retail demand reviving as Japan has dropped pandemic controls, according to the survey.
Data for 2016 to 2019 showed commercial land prices rising at accelerating rates, helped by stimulatory central bank monetary policy and a boom in hotel construction to cater to growing foreign tourists.
But strict COVID-19 border controls, partly relaxed in June, effectively barred tourist arrivals. Only 250,000 foreigners visited last year, 0.8% as many as in 2019.
As the yen has fallen nearly 20% against the U.S. dollar this year, officials have hinted at drastic further relaxation of border controls to boost the numbers of foreign visitors. read more
Property prices in some popular tourism locations rose in the 12 months to July 1 thanks to returning domestic visitors. But areas that have relied heavily on foreign tourists, such as downtown Osaka, continued to see falling prices, the land ministry official said.
Tuesday’s data also showed a 1.7% rise in the value of industrial land. It was the fifth year of price growth, helped by solid demand for space for online-commerce warehouses.
Among 21,431 surveyed locations, an industrial area in southwestern Kumamoto prefecture enjoyed the biggest land price increase, 31.6%, thanks to factory construction in the neighbourhood by Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW).
With partners Sony Group (6758.T) and Denso Corp (6902.T), TSMC, the world’s largest contract chipmaker, is building its first Japanese plant in Kumamoto. read more
“A wave of semiconductor-related firms and logistics operators are establishing their businesses there (in Kumamoto),” the land ministry official said, adding that the project had also stimulated residential and commercial property values in adjacent districts.
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Reporting by Kantaro Komiya; Editing by Bradley Perrett
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Under-construction apartments are pictured from a building during sunset in the Shekou area of Shenzhen, Guangdong province, China November 7, 2021. Picture taken November 7, 2021. REUTERS/David Kirton
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BEIJING, Sept 19 (Reuters) – In the southern Chinese city of Shenzhen, where the real estate sector has slowed, luxury property is bucking the downtrend, the official Securities Times reported on Monday, as wealthy buyers seek a safe haven amid a weak market.
In the southern tech hub, a total of 604 units in a luxury development that has not yet been built have been presold for up to 162,000 yuan ($23,087) per square metre, it said.
With the units ranging in size to up to 425 square meters, that suggests some could have reached values of $9.8 million.
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In May, units at a project going for at least 18 million yuan each were sold out on the first day they were launched, the newspaper said.
China’s property market has slowed sharply in recent months, with prices and sales both falling after authorities stepped in to cut excessive debt held by property developers, triggering a liquidity crunch and hitting buyer sentiment.
But new luxury homes are still popular with buyers, who see them as “hard currency” in a feeble property market, the newspaper cited industry insiders as saying.
Demand has remained bleak despite a slew of stimulus measures imposed by over 200 cities to stoke buyers’ interest, with property sales by floor area falling 48% on year in August.
In contrast, in the first half of this year, the average selling price of luxury properties valued at 10 million yuan and above rose 11% from a year earlier, according to China Real Estate Information Corp (CRIC), an independent property consultancy service.
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Reporting by Liangping Gao and Ryan Woo; Editing by Jan Harvey
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REINZ data shows house prices falling $322 a day last month. Photo / NZME
Real Estate Institute data out today showing house prices fell $322 a day in the last month fulfilled expectations of the plunge this year and next, experts said.
Satish Ranchhod, Westpac senior economist,