WASHINGTON, June 18 — US homebuilding unexpectedly fell in May, but data for the prior two months was revised higher and building permits increased, suggesting that the housing market was drawing some support from a sharp decline in mortgage…
BEIJING: New home prices in China rose at their fastest pace in five months in May, complicating government efforts to keep frothy housing markets under control as it rolls out more stimulus for the slowing economy.
Average new home prices in China’s 70 major cities rose 0.7% in May from the previous month, picking up from a 0.6% rise in April and the quickest pace since December, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Tuesday.
That marked the 49th straight month of price gains. Sixty-seven of the total 70 cities surveyed by the NBS reported higher prices in May, the same as April.
On an annual basis, home prices increased 10.7% in May, unchanged from April’s growth rate.
Beijing has repeatedly urged local governments to keep runaway prices under control, but a recent easing in credit conditions, pent-up demand for housing, and an implicit government mandate to prevent a collapse have kept the market surprisingly resilient.
But further curbs on home buyers would risk adding to pressure on China’s economy, which has seen sales slowing due to weaker domestic demand and an escalating trade war with the United States.
Data last week showed the biggest drop in property sales in nearly two years in May, and markedly slower growth in investment and new construction starts, pointing to further economic weakness ahead and more government growth boosting measures.
“If the market becomes overheated policymakers will definitely rush to regulate it,” Zhang Dawei, a Beijing-based analyst of property consultancy Centaline, wrote in a note.
Top Chinese officials including Guo Shuqing, chairman of China’s banking regulator, have warned in recent weeks that Beijing must remain vigilant about property bubble risks.
“History has proven that countries and regions that are overly-reliant on real estate for economic development will ultimately have to pay a heavy price,” Guo told a forum in Shanghai last week.
Some developers have sought to promote sales by cutting prices, which has raised alarm. The Chinese city of Enshi tried to stabilise house prices by urging developers to halt drastic price cuts, threatening punishing measures unless such “wrong behaviours” stopped.
RISKS OF POLICY EASING
China’s home price growth has slowed significantly since the second half of 2017 due to intensive local curbs on speculative investments.
But the trends have been uneven across the country, with recent signs of resurgent price pressures. Some smaller cities with rising inventories have quietly loosened restrictions on home buyers to prop up consumer confidence and demand.
Mortgage rates have also been coming down in some areas in response to regulators’ calls on banks to ramp up lending to support the economy.
The average interest rate on first home loans continued to drop in May to the lowest level since 2018, according to a market report cited by state-backed Economic Information Daily.
New household loans – mainly mortgages – still remained elevated, totalling 662.5 billion yuan ($95.70 billion) in May, and accounting for 56.14% of total new loans last month.
Higher prices were mainly driven by the smaller tier-3 cities, up 0.8% on a monthly basis compared with a 0.5% gain in April, the statistics bureau said in a note accompanying the data.
Prices in China’s four top-tier cities – Beijing, Shanghai, Guangzhou and Shenzhen – saw slower growth in May, increasing 0.3% versus 0.6% growth in the previous month.
Tier-2 cities, which include most of larger provincial capitals, grew 0.6%, unchanged from the rate a month earlier.
Xian, the capital of Shaanxi Province in western China with a population of over 7 million, became the top market performer in May, with prices surging 2% on-month.
Centaline’s Zhang estimates various Chinese government entities announced 41 tightening measures at the city level in May.
“It is still a whack-a-mole game and the intensity of policy tightening so far has not exceeded market expectations,”
“But to a certain extent, these policies will alleviate some upward pressure on the prices.”
SYDNEY: Australian retailers began the second quarter of the year on a gloomy note as sales fell in April in a sign of rising strain on the broader economy just hours before the country’s central bank is seen likely to cut interest rates to record lows.
Tuesday’s data from the Australian Bureau of Statistics (ABS) showed retail sales fell 0.1% in April from March, the first negative reading this year and confounding forecasts for a 0.2% gain.
The decline, led by household goods, eating out and clothing, briefly sent the local dollar to the day’s low of $0.6959. The currency was last flat at $0.6973.
Household consumption has been a major source of worry for the Reserve Bank of Australia (RBA) as miserly wage growth and falling home prices eat into spending power in a sector that accounts for 56% of the economy.
The soggy data will support widespread expectations for at least two cuts this year to 1.00%. Financial markets are pricing in a 50-50 chance of a third move to 0.75% by Christmas.
A cut on Tuesday – the decision is due at 0430 GMT – will be the first since August 2016.
Economists say better days might be ahead, helped by expectations of lower mortgage rates and a boost to household incomes from promised income tax cuts.
A 3% increase in the national minimum wage from July 1 will likely support those on lower incomes, aiding consumption.
Yet, industry-wide wage growth is rising at a snail-paced 2.3% and “if that doesn’t improve then any pick-up in retail spending will be short-lived,” said Callam Pickering, APAC economist for global job site Indeed.
TWO SPEED ECONOMY
In contrast to the gloomy household sector, businesses are holding up better.
Other data released on Tuesday showed exports added 0.2 percentage points to first-quarter gross domestic product (GDP) led by booming demand for Australia’s resources, notably iron ore.
The trade surplus ballooned to $13.6 billion in the March quarter, easily the highest on record, offsetting much of the country’s perennial deficit in income, which includes dividend and debt payments, investment flows and the like.
As a result, Australia’s current account deficit shrank to just A$2.9 billion, better than an upwardly revised A$6.3 billion deficit in the previous quarter and the smallest since mid-1997.
That follows data on Monday showing a decent increase in first-quarter company profits together with higher wages, prompting some economists to upgrade their GDP forecasts.
Data, due 0130 GMT on Wednesday, is now likely to show Australia’s economy grew 0.5% for the first quarter, from earlier expectations of 0.4%. Annual growth is still seen slowing to a decade-low of 1.8%.
“In light of the data… we are nudging up our estimate for Q1 GDP from 0.4% q/q to 0.5% q/q,” said Ben Udy, Singapore-based economist for Capital Economics.
“The big unknown is still consumption spending.” – Reuters
HONG KONG, May 14 — Hong Kong is the most favourable offshore real estate market for mainland Chinese, despite an escalation in US-China trade tensions and concerns over a controversial extradition law that will extend Beijing’s power over the…
HONG KONG: Hong Kong’s private home prices, one of the world’s most expensive property markets, rose in March at their fastest pace since September 2016 on strong pent-up demand and improved sentiment.
Home prices in the densely-populated city gained 2.9 percent last month, the third straight rise and accelerating from February’s revised 1.6 percent increase, government data showed on Tuesday.
Hong Kong’s home prices fell from August to December last year weighed by U.S.-China trade tensions and higher interest rates after rising for 28 consecutive months, but then quickly rebounded since the beginning of this year.
“The rise is higher than expected,” said Thomas Lam, executive director of Knight Frank. “If the index continues to rise in the next two, three months and there are no other negative factors, housing prices will see another uptrend in the short term.”
Over the past decade, ultra-low interest rates, limited housing supply and large capital flows from mainland Chinese buyers into the financial city on China’s doorstep pushed housing prices up more than 200 percent, angering many Hong Kong residents who could not afford to jump on the bandwagon.
Property consultancy CBRE named Hong Kong the least affordable housing market for the eighth year in a research report published earlier this month, with an average property costing $1.2 million or $2,091 per square foot. That compares with Singapore, ranked the second priciest, at $874,372 and $1,063, respectively.
Another consultancy JLL said on Monday the drop in stamp duties levied on non-first time and foreign homebuyers in the first quarter suggested the bulk of buyers were local first-time purchasers.
As the property market starts to revive, developers are selling new launches at higher prices than a few months ago.
Last week, New World Development and Henderson Land launched their joint high-rise residential development in Kowloon at a floor price 10 percent higher than the neighbourhood. Analysts expected developers will offer less attractive selling prices than last year going forward.
In the first quarter, developers sold a total of 5,532 new flats in the first three months, the highest in 10 quarters. The figure was up 70 percent from the previous quarter and 44 percent from a year earlier.
Property developers also became more active in land auctions. A land plot in the New Territories received 11 tenders last week, according to Hong Kong media, a high in recent months despite the record-asking price of the area.
KUALA LUMPUR: The lack of an overall housing policy as well as down-the-line aspects such as the absence of regulation on price discovery in the primary market are to be blamed for inflated home prices, not valuation and valuation methodology, according to the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS).
In a statement, PEPS said that in the primary market, as opposed to the secondary market, there is poor price discovery. The public does not know the real price since the various incentives and rebates (amounting to in instances 20% to 30%) can only be known by a potential purchaser when he or she goes to buy a house.
“The real price less those incentives are hidden to the public until the point of actual purchase. This gives rise to the main ‘inefficiency’ in the housing market that is preventing house prices from adjusting downwards towards to a more sustainable and transparent median house price ratio as against income,” PEPS said in a statement today.
It said banks and financial institutions are doing their best, through proper market based valuations to discover this price and to lend based on the real prices so that in the event of a default on a loan they do not get lumbered with unsaleable properties at auctions.
“The oversupply in the market does not help but secondary market transactions supplied by valuers and estate agents do help.”
PEPS has called upon the Ministry of Housing & Local Government to immediately sanction that all advertisements in the primary market for houses to carry not only the “headline price” but the actual price at which a buyer can secure a purchase.
“The incentives and rebates must be detailed out in the advertisement and brochures, in the interest of transparency for the house-buying public and for assisting in creating a more efficient housing market,” it added.
WASHINGTON, April 23 — US home sales fell more than expected in March as rising demand stoked by declining mortgage rates and slowing house price inflation continued to be frustrated by a lack of properties, especially in the lower-priced segment…
BEIJING: China’s economy grew at a steady 6.4% pace in the first quarter, defying expectations for a further slowdown, as industrial production jumped sharply and consumer demand showed signs of improvement.
The upbeat readings, which included faster growth in investment, will add to optimism that China’s economy may be starting to stabilise even as Beijing and Washington appear to be edging towards a trade deal.
Investors have ranked China’s slowdown and the trade war as the biggest risks facing the faltering global economy.
But analysts warn it is too early to call a sustainable turnaround, and further policy support is needed to maintain momentum in the world’s second-largest economy. Many had expected a recovery only in the second half of 2019.
Beijing has ramped up fiscal stimulus this year, announcing billions of dollars in additional tax cuts and infrastructure spending, while Chinese banks lent a record 5.8 trillion yuan (RM3.59 trillion) in the first quarter, more than the economy of Switzerland.
“We need more evidence to call a full-fledged recovery. Our view for the economy is still cautious,” said Jianwei Xu, senior economist, Greater China at Natixis in Hong Kong. “We think it (the stronger-than-expected data) is somewhat linked to the stimulus, but we can’t attribute it all to it.”
Analysts polled by Reuters had expected GDP growth to slow slightly to 6.3% in January-March from a year earlier.
Share markets and most currencies in Asia rose in relief, as China’s slowdown has increasingly weighed on its trading partners from Japan to Germany. The yuan currency rose 0.4% to a seven-week high.
Government support is gradually having an effect, though the economy still faces pressure, Mao Shengyong, spokesman at the National Bureau of Statistics, cautioned today.
Quarterly growth was supported by a sharp jump in industrial production, which surged 8.5% in March on-year, the fastest in over 4½ years. That handily beat estimates of 5.9% and 5.3% in the first two months of the year.
Output of building materials such as steel and cement, as well as machinery, showed strong gains. Prices of steel reinforcing bars used in construction hit 7½-year highs this week on firm demand.
Industrial output growth will likely remain steady, with exports expected to keep expanding, Mao said.
Exports rebounded more than expected in March, but analysts say the gains could have been due to seasonal factors rather than a rebound in tepid global demand. Long holidays in February likely pushed some production into the following month.
The jump in output was also somewhat at odds with trade data last week, which showed imports shrank for the fourth straight month, suggesting domestic demand is still sluggish.
“We don’t think the strength in industrial output is sustainable, said Nie Wen, an economist at Hwabao Trust.
“At home, the huge amount of social financing might ease as the central bank is wary of reigniting property market bubbles, while abroad the global economic recovery is expected to slow down,” Nie said, pencilling in more moderate output growth of 6.0-6.5% for the rest of the year.
The OECD on Tuesday sounded a warning about the dangers of prolonged stimulus, saying China’s support measures will shore up growth this year and next but may undermine its drive to control debt and worsen structural distortions over the medium term.
Analysts polled by Reuters expect China’s growth to slow to a near 30-year low of 6.2% this year, as sluggish demand at home and abroad and the trade war weigh on activity despite support measures.
The government is aiming for growth of 6.0-6.5%.
Today’s data also helped ease fears of weakening consumer confidence in China. Retail sales rose 8.7% in March, beating estimates of 8.4% and the previous 8.2%.
Sales were led by stronger demand for appliances, furniture and building materials, reflecting a resurgence in the residential property market, a key economic driver.
Real estate investment rose slightly to 11.8% in the first three months, while construction starts jumped in March. Data on Tuesday showed March new home prices rose at a quicker pace after months of cooling.
But auto sales extended their decline in March, falling 4.4% on-year.
Fixed-asset investment expanded 6.3% in January-to-March on-year, in line with estimates but picking up from the previous period as new road, rail and port projects gathered steam.
Local governments will be allowed to issue 2.15 trillion yuan of special purpose bonds in 2019 to fund infrastructure projects, a jump of 59% from last year.
On a quarterly basis, GDP in the first quarter grew 1.4%, as expected, but dipped from 1.5% in October-December.
However, many analysts do not expect a sharp rebound in China’s economy like its recoveries in the past, which produced a strong reflationary pulse worldwide. Most say its stimulus has been relatively more restrained this time around, given concerns about high levels of debt left over from past credit sprees.
Earlier support measures will take time to fully kick in, and corporate balance sheets are expected to remain under stress if profits are slow to recover from their worst slump in more than seven years.
Some analysts such as Nomura warn there is a risk of a “double dip”, where growth appears to improve only to falter soon after. In particular, it noted there was further heavy drop in land sales for future development, which could drag on construction and local government revenues later this year.
The central bank has already slashed banks’ reserve requirement ratios five times over the past year and is expected to ease policy further in coming quarters to spur lending and make borrowing costs more affordable.
However, some analysts said authorities could be more cautious about further stimulus if data remains solid.
China has rolled out many policies to support growth – the key is to implement them, Mao said.
BEIJING: China’s stimulus measures will shore up economic growth this year and next but may undermine the country’s drive to control debt and worsen structural distortions over the medium term, the Organisation for Economic Cooperation and Development (OECD) said in a report today.
Beijing has stepped up fiscal stimulus to prevent a sharper slowdown in the world’s second-largest economy, which is being squeezed by weaker domestic demand and a trade war with the United States.
Local governments will be allowed to issue 2.15 trillion yuan (RM1.3 trillion) worth of special purpose bonds in 2019 to fund infrastructure projects, a jump of 59% from last year.
But S&P Global Ratings estimated last year that local governments were already sitting on hidden debt that could be as high as 40 trillion yuan.
“Infrastructure stimulus could lift growth over the projection horizon, but it could lead to a further build-up of imbalances and capital misallocation, and thereby weaker growth in the medium term,” the OECD said in its latest survey on China’s economy.
“The stimulus risks increasing once again corporate sector indebtedness and, more generally, reversing progress in deleveraging,” it said.
China’s corporate debt has fallen to about 160% of gross domestic product (GDP) due to a multi-year clampdown on riskier types of financing and debt, but the level was still higher than in other major economies, the OECD said.
The government in March announced tax and fee cuts of 2 trillion yuan for companies this year, which will lift its budget deficit to 2.8% of GDP this year from 2.6% in 2018.
China’s fiscal stimulus could be as high as 4.25% of GDP this year, up from 2.94% in 2018, the OECD added.
Easier monetary policy should help reduce the risk of liquidity strains which could put further pressure on businesses, said Ludger Schuknecht, deputy secretary-general of the OECD.
But he said Beijing should prevent any policy “overshooting”.
“I’m sure government authorities and the PBoC are monitoring this carefully. It’s a matter of implementing it (stimulus) in the right way,” he told an event ahead of the release of the report.
New bank loans rebounded more than expected in March, and totalled a record 5.8 trillion yuan for the quarter, as policymakers pushed lenders to support struggling smaller, private companies, which are seen as higher credit risks than state-controlled firms.
But there are concerns that looser lending standards may fuel a further rise in bad loans as well as inefficient investment and speculation, particularly in the property market.
Underscoring the OECD’s warning about debt risks, data today showed growth in new home prices accelerated in March after cooling since November 2018.
The People’s Bank of China (PBoC) has already slashed banks’ reserve requirement ratio five times over the past year and is widely expected to ease policy further in coming quarters to spur lending and reduce borrowing costs.
China’s economic growth is likely to slow to 6.2% this year – the weakest pace in nearly 30 years, and growth is expected to cool further to 6.0% in 2020, the OECD said. The economy expanded 6.6% in 2018.
BEIJING, April 16 — New home prices in China grew slightly faster in March after growth slowed the previous month, putting a floor on the cooling market, as Beijing rolled out stimulus to boost the economy. The sector’s solid growth could…