China’s Stumbling Property Sector Shows Long Road To Recovery
Kanebridge News
    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,599,192 (-0.51%)       Melbourne $986,501 (-0.24%)       Brisbane $938,846 (+0.04%)       Adelaide $864,470 (+0.79%)       Perth $822,991 (-0.13%)       Hobart $755,620 (-0.26%)       Darwin $665,693 (-0.13%)       Canberra $994,740 (+0.67%)       National $1,027,820 (-0.13%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $746,448 (+0.19%)       Melbourne $495,247 (+0.53%)       Brisbane $534,081 (+1.16%)       Adelaide $409,697 (-2.19%)       Perth $437,258 (+0.97%)       Hobart $531,961 (+0.68%)       Darwin $367,399 (0%)       Canberra $499,766 (0%)       National $525,746 (+0.31%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 10,586 (+169)       Melbourne 15,093 (+456)       Brisbane 7,795 (+246)       Adelaide 2,488 (+77)       Perth 6,274 (+65)       Hobart 1,315 (+13)       Darwin 255 (+4)       Canberra 1,037 (+17)       National 44,843 (+1,047)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 8,675 (+47)       Melbourne 7,961 (+171)       Brisbane 1,636 (+24)       Adelaide 462 (+20)       Perth 1,749 (+2)       Hobart 206 (+4)       Darwin 384 (+2)       Canberra 914 (+19)       National 21,987 (+289)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $770 (-$10)       Melbourne $590 (-$5)       Brisbane $620 ($0)       Adelaide $595 (-$5)       Perth $650 ($0)       Hobart $550 ($0)       Darwin $700 ($0)       Canberra $700 ($0)       National $654 (-$3)                UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $730 (+$10)       Melbourne $580 ($0)       Brisbane $620 ($0)       Adelaide $470 ($0)       Perth $600 ($0)       Hobart $460 (-$10)       Darwin $550 ($0)       Canberra $560 (-$5)       National $583 (+$1)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,253 (-65)       Melbourne 5,429 (+1)       Brisbane 3,933 (-4)       Adelaide 1,178 (+17)       Perth 1,685 ($0)       Hobart 393 (+25)       Darwin 144 (+6)       Canberra 575 (-22)       National 18,590 (-42)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 6,894 (-176)       Melbourne 4,572 (-79)       Brisbane 1,991 (+1)       Adelaide 377 (+6)       Perth 590 (+3)       Hobart 152 (+6)       Darwin 266 (+10)       Canberra 525 (+8)       National 15,367 (-221)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.50% (↓)       Melbourne 3.11% (↓)       Brisbane 3.43% (↓)       Adelaide 3.58% (↓)     Perth 4.11% (↑)      Hobart 3.78% (↑)      Darwin 5.47% (↑)        Canberra 3.66% (↓)       National 3.31% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND       Sydney 5.09% (↑)        Melbourne 6.09% (↓)       Brisbane 6.04% (↓)     Adelaide 5.97% (↑)        Perth 7.14% (↓)       Hobart 4.50% (↓)       Darwin 7.78% (↓)       Canberra 5.83% (↓)       National 5.76% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 0.7% (↑)      Melbourne 0.8% (↑)      Brisbane 0.4% (↑)      Adelaide 0.4% (↑)      Perth 1.2% (↑)      Hobart 0.6% (↑)      Darwin 1.1% (↑)      Canberra 0.7% (↑)      National 0.7% (↑)             UNIT RENTAL VACANCY RATES AND TREND       Sydney 0.9% (↑)      Melbourne 1.4% (↑)      Brisbane 0.7% (↑)      Adelaide 0.3% (↑)      Perth 0.4% (↑)      Hobart 1.5% (↑)      Darwin 0.8% (↑)      Canberra 1.3% (↑)        National 0.9% (↓)            AVERAGE DAYS TO SELL HOUSES AND TREND         Sydney 28.7 (↓)       Melbourne 30.7 (↓)       Brisbane 31.0 (↓)       Adelaide 25.4 (↓)       Perth 34.0 (↓)       Hobart 34.8 (↓)       Darwin 35.1 (↓)       Canberra 28.5 (↓)       National 31.0 (↓)            AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 25.8 (↓)       Melbourne 30.2 (↓)       Brisbane 27.6 (↓)       Adelaide 21.8 (↓)       Perth 37.8 (↓)       Hobart 25.2 (↓)       Darwin 24.8 (↓)       Canberra 41.1 (↓)       National 29.3 (↓)           
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China’s Stumbling Property Sector Shows Long Road To Recovery

Pressure isn’t expected to ease as data for two key sectors came in negative for July.

By Cao Li
Mon, Aug 1, 2022 11:43amGrey Clock 5 min

China’s major economic pillars wobbled in July with weakness in manufacturing and the all-important property sector, showing the pressure on a country that remains a drag on the struggling global economy.

Chinese manufacturing activity unexpectedly contracted in July, as Beijing’s stringent Covid-19 restrictions and weak demand undercut hopes for a more robust economic revival.

The official manufacturing purchasing managers index pulled back to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said Sunday. The result left the index below the 50 level that separates expansion from contraction and short of the median forecast of 50.3 among economists polled by The Wall Street Journal.

Meanwhile, 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 a sharp 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 China Real Estate Information Corp., a Shanghai-based 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 long Covid-19 lockdowns in Shanghai and other Chinese cities earlier this year.

The results in manufacturing and real estate, itself accounting for one-third of China’s economy by some estimates, underscored how far the country remains from any semblance of postpandemic normalcy.

Although local governments across China have grown more adept at controlling Covid-19 outbreaks swiftly and with fewer disruptions than in previous months, Beijing has reaffirmed its commitment to strict zero-Covid policies for the foreseeable future.

And while municipalities have stepped up activity to support the property sector and tamp down public anger over unfinished apartments, the central government has yet to come up with the sort of broad rescue fund that some economists say is needed.

On Thursday, the Politburo, the top policy-making body of China’s ruling Communist Party, indicated the government remains comfortable with its approach. It toughened its language on the importance of containing Covid-19 and explicitly cited political considerations in balancing pandemic controls and economic growth. It also offered little sign that it would relent from its property-sector regulatory campaign.

In mid-July, China reported that gross domestic product expanded at a meagre 0.4% annual rate in the second quarter compared with a year earlier, its weakest growth rate in more than two years, highlighting the depth of the damage caused by stringent lockdowns. The poor showing has prompted top leaders to effectively acknowledge that the government’s official GDP target of roughly 5.5% growth in 2022 is now out of reach, barring a big stimulus push that Beijing has all but ruled out.

Chinese officials speaking Sunday nodded to the challenges ahead for the economy.

“The foundation of economic recovery still needs to be consolidated,” said Zhao Qinghe, a senior official at the statistics bureau, citing insufficient market demand and weakness among energy-intensive industries as particular sources of concern.

The negative readings come as growth in the U.S. has weakened as well.

The U.S. economy shrank for a second quarter in a row, as the country’s housing market buckled under rising interest rates and high inflation took steam out of business and consumer spending.

The U.S. Commerce Department said GDP adjusted for seasonality and inflation fell at an annual rate of 0.9% in the second quarter after a 1.6% contraction in the first three months of the year.

The two consecutive declines meet a rule of thumb for a recession. While the U.S. determines recessions differently, its economy is clearly decelerating.

Economic growth in the eurozone accelerated in the second quarter, buoyed by the lifting of most pandemic restrictions even as Russia’s invasion of Ukraine sent energy and food costs surging.

The European Union’s statistics agency on Friday said the combined gross domestic product of the eurozone’s members was 0.7% higher in the three months through June than in the first quarter.

Still, business surveys for July suggest the eurozone is already experiencing a decline in economic activity, and Russian cuts to natural gas supplies would add to the pressures on the economy.

The pressure on major world economies comes as global economic activity and consumers have been broadly hurt by supply disruptions and price increases triggered by imbalances arising from the pandemic and worsened drastically by the war in Ukraine. Aggressive interest-rate increases by major central banks around the world are expected to further suppress economic activity.

In China’s manufacturing sector, only 10 of the 21 industries surveyed by the statistics bureau showed expansion in July compared with 13 in June.

China’s export sector, a key growth engine for the country’s initial postpandemic recovery, continued to disappoint. In July, the PMI subindex tracking export orders remained in contractionary territory for a 15th consecutive month.

More downside risks remain after the U.S. Federal Reserve raised its benchmark lending rate by another 0.75 percentage point in late July, its second such move this summer, in a bid to combat inflation. Tightening rates in the U.S. and other major economies threaten to stifle overseas demand for Chinese-made goods, economists say.

Joblessness among workers age 16 to 24 has soared, rising to a record 19.3% in June from 18.4% in May. The subindex tracking employment edged down to 48.6 from 48.7 in June, the statistics bureau said Sunday.

Separately on Sunday, China’s official nonmanufacturing PMI fell to 53.8 in July from a reading of 54.7 in June, the statistics bureau said. The subindex measuring service-sector activity pulled back to 52.8 in July from 54.3 in June, while the subindex tracking construction activity rose to 59.2 from 56.6.

While both subindexes remain in expansionary territory, strict social restrictions requiring, for instance, PCR testing results to board public transit or enter restaurants in many cities as well as quarantines for those traveling from one city to another, continue to cast a shadow over consumer demand, especially for restaurants, hotels and entertainment venues.

The weaker PMI readings took place against the backdrop of continued sporadic Covid-19 outbreaks in July, though the lockdowns were largely confined to less-developed regions of the country, including landlocked Gansu province in China’s arid northwest and poor, mountainous Guangxi in the southwest.

Meanwhile, the property-market weakness that began late last year has gone from bad to worse in recent weeks as home buyers across the country threaten to halt mortgage payments for unfinished apartments, which in turn has further weakened developers and some regional banks, scared off other potential home buyers and dented market confidence more broadly.

The revolt started at the end of June at a China Evergrande Group project in Jingdezhen, a city in south-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 would 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 another 41% in the week ended July 17.

Pressure on the government is building, but hopes among some developers, investors and creditors for a large real-estate rescue package from Beijing remain unrealized. The Politburo 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.

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

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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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

By CAROL RYAN
Tue, Mar 5, 2024 3 min

The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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