China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers
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China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers

Sales fell on the year and from the previous month, ending a budding recovery.

By Cao Li
Wed, Aug 3, 2022 10:46amGrey Clock 3 min

A nascent two-month recovery in China’s home sales ended in July, as a widespread mortgage revolt over concerns that ailing property developers wouldn’t be able to deliver still-unfinished apartments weighed on demand.

Sales at the country’s top 100 property developers fell 39.7% in July from the same period last year to the equivalent of $77.6 billion, or 523.14 billion yuan, according to data released Sunday by CRIC, a Chinese real-estate data provider.

July sales were down 28.6% from June, ending a two-month recovery in month-to-month sales growth. Apartment sales showed increases in May and June from the previous months, as activity picked up following Covid lockdowns in Shanghai and other Chinese cities earlier this year.

China’s private-sector property developers went on a yearslong, debt-fueled building boom, selling homes before they were built, until a funding crisis that began last year led to defaults and stalled projects. Buyers who typically sank large down payments into those homes have been venting their frustrations all summer.

China’s home sales often experience a lull in July, because developers rush to book sales in June to meet first-half targets. But analysts said the main drag on activity this time has been the mortgage revolt and its impact on would-be buyers’ confidence.

The revolt started at the end of June at an Evergrande project in Jingdezhen, in central China’s Jiangxi province, where frustrated home buyers threatened to renege on mortgages on unfinished properties. Hundreds of buyers from roughly 320 projects across the country had followed suit as of July 29, according to a tally of statements from homeowners who said they will stop paying their mortgages circulating on GitHub, a Microsoft Corp.-owned coding-collaboration site.

Home buyers—some waving signs saying “Construction stops and mortgage stops!”—say the threat to halt payments is the only way to get their voices heard as projects stall and delivery times drag out. A broadly slowing economy that is biting into employment and incomes is adding to the pressure. Some buyers say they are increasingly unwilling to keep paying for a home they aren’t sure they will ever receive.

Week-over-week data put together earlier by CRIC to study the impact of the mortgage revolt had signalled the July decline. In 30 cities CRIC determined to have been seriously affected by the revolt, new home sales dropped by 12% in the week ended July 10 from the week before, then fell 41% in the week ended July 17.

More home buyers are choosing second-hand homes or new ones built by state-owned developers, which are typically in a stronger financial position.

Pressure on the government is building, but hopes for a large real-estate rescue package from Beijing remain unrealized. The Politburo, China’s top policy-making body, made clear recently that local governments are ultimately responsible for fixing the property woes in their markets.

Budget-strapped local authorities have strained to boost property demand, resorting to increasingly creative measures. Dozens of cities have lowered down payments and interest rates. Some are offering outright cash subsidies. Others have announced relief funds for cash-strapped developers or plans to take over troubled projects.

“But the sector won’t stabilize if developers’ liquidity crunch is not relieved,” said Song Hongwei, a research director of Tongce Research Institute, which tracks and analyzes China’s real-estate market.

On Friday, troubled property developer China Evergrande Group sketched out the contours of a plan to restructure its billions of dollars in debt and said its contracted apartment sales in the first six months of the year had fallen about 97% from the same period a year earlier.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: July 31, 2022



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Expert tips for prospective buyers looking to purchase a home in 2024.

By Josh Bozin
Fri, Apr 12, 2024 3 min

For aspiring homeowners, be it a first-time buyer, downsizer, or investor, picturing your idea of homeownership bliss is the easy part. But before deliberating on furniture choices or scouting for that perfect neighbourhood coffee, understanding your purchasing power stands out as the most important step in ensuring your success in homeownership.

And with the Australian property market gaining momentum in 2024, there’s never been a better time to come to grips with your financial options.

In 2023, amid the changing financial landscape that saw rising interest rates and the cost of living skyrocket, among other factors, the total amount borrowed for property purchases across Australia was estimated at $300.9 billion, a 12.7 percent decrease from the previous year, according to PEXA’s latest Mortgage Insights Report.

Each mainland state also experienced a decline in new lending, according to the report, with Victoria and New South Wales seeing the biggest drops to $84.1 billion and $109.5 billion, respectively.

While this trend reflects the repercussions of such financial hardships on the everyday Australian, John Morello, director and auctioneer at Jellis Craig, said we’re seeing renewed confidence in the property market during the first quarter of 2024, particularly in Melbourne.

“Auction clearance rates have started the year strongly and consumer sentiment is rising. This lift is driven by cooling inflation and an improved outlook on interest rates. At Jellis Craig, as with the rest of the market, we are experiencing an increase in volume of property compared to the same period in March last year (up 28% in 2024),” Mr Morello said.

“Melbourne’s property market, in particular, is showing its ongoing evolution and resilience.”

PEXA’s report revealed that, while borrowing saw a decrease in 2023 in Australia, Australians still invested $613.0 billion in property purchases in 2023. In 2024, purchasing confidence is only going up, as prospective first home buyers, seasoned downsizers, and savvy investors look to capitalise on a flood of new property hitting the market, coupled with the lowering of interest rates across the board.

“With more certainty in the economic outlook, along with an increase in volume of property available, we are seeing these factors translate to early signs of a boost in confidence in both buyers and sellers,” said Mr Morello.

“Further encouraging data shows that whilst there is more property available to purchase, more people are inspecting property, again indicating that demand has increased broadly across our marketplace.”

If you’re in the market for a new property, the biggest question you must ask yourself is how much house can I afford?

A great starting place is to speak with your mortgage broker or financial professional, who can guide you on your lending options. This is critical, as you need to know what your future repayment options might look like, and ultimately, what you will typically be able to afford.

A useful tool for judging whether you can afford a specific property is to factor in the 28/36 rule — a rough guide that suggests you should not spend more than 28 percent of your gross monthly income on housing, and no more than 36 percent on all debts. Another useful tool is the idea of a debt-to-income ratio (DTI); a formula whereby an individual can divide all of their monthly debt payments by gross monthly income to arrive at a number that one can measure as a way of managing monthly mortgage payments.

Mr Morello emphasised the need to understand affordability and what’s feasible for each individual when looking to make a purchase, no matter the budget, on a property in 2024.

“It’s pivotal to work out what you can afford. Get your finances in order. Consider all associated costs with buying, and research what concessions and grants are available,” said Mr Morello.

“It’s easy for individuals to begin the process today. Start actively searching potential properties on a weekly basis, and research areas you are interested in. Check weekly sales results, attend inspections and auctions, to get a feel for the process. Just remember, it’s important to be really comfortable in understanding your living expenses, and what the ongoing expenses will be once you have bought a property.

“For example, mortgage repayments, council rates, water, power, owners corp fees, insurances, maintenance costs; if you are buying as an investment, the Land Tax payable on that property which is an ongoing tax. There’s many factors to consider.”

To see what’s possible for your specific circumstances, visit our Finance Portal for specific tools, guides and tips—as well as our own mortgage calculator—to assist you on your property journey.

 

MOST POPULAR
35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

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