China’s new home sales last year likely exceeded $1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.
China Real Estate Information Corp., or CRIC, and Centaline Property Agency Ltd. both forecast that National Bureau of Statistics numbers to be released today will show 2013 sales topped $1 trillion. The value was 5.9 trillion yuan ($975 billion) in the first 11 months. New-home prices in December climbed 20 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing, the bureau of statistics said Jan. 18.
Premier Li Keqiang hasn’t imposed additional nationwide measures to cool the market since his predecessor Wen Jiabao stepped up a three-year campaign in March, ordering higher down payments and interest rates for second-home loans in cities with “excessive fast” price gains. Instead, Li has left it up to individual cities to impose their own curbs, with at least 10, many of them provincial capitals, tightening local property policies since November.
“The effect of those measures was limited last year because in first-tier cities demand still outpaced supply,” Ding Shuang, a Hong Kong-based senior China economist with Citigroup Inc. said in a phone interview.
Shenzhen, Shanghai and Guangzhou have all raised minimum down payments for second homes to 70 percent since November.
The value of new housing sales in the January-November period last year surged 31 percent from the same period a year earlier. It was 5.4 trillion yuan in 2012, an 11 percent gain from the previous year, according to the government data.
Existing-home prices rose 20 percent in the capital Beijing last month from a year earlier and increased 14 percent in Shanghai, according to the Jan. 18 data.
Private figures also showed no sign of cooling in the property market. Home prices in December had the biggest year-on-year gain in 2013, increasing 12 percent, according to SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner.
“There has been a misconception that China’s property curbs are aimed at cracking down on the market or squeezing sales,” said David Hong, a Hong Kong-based property analyst at CRIC, a property data and consulting firm. “The country’s economy, especially that of less affluent cities, is relying on the real estate industry.”
First-tier cities, including Beijing and Shanghai, may impose further curbs if prices rise too fast, Standard & Poor’s Hong Kong-based analyst Bei Fu said Jan. 17. Home prices will rise about 5 percent this year from 2013, while home sales volume will jump about 10 percent, according to S&P.
Almost one-fifth of respondents in a Renmin University of China survey gave a zero score to the government’s property policies, indicating “near despair” with housing prices, the official China News Service reported last month, citing survey results.
New-home prices in the eastern city of Wenzhou in Zhejiang province fell 2.6 percent from a year earlier, declining for a 27th month, the only city among the 70 to show a decrease, the government data showed.
“The government should increase land and home supply in major cities because only artificially tightening the market through government orders will not work,” Citigroup’s Ding said.
Beijing, the financial center of Shanghai, and the southern business hubs of Guangzhou and Shenzhen are considered first-tier cities by the statistics bureau. The four have “high levels of international business connectivity, deep corporate bases and well-developed international grade stock, and they are the country’s most liquid and transparent markets,” according to broker Jones Lang LaSalle Inc.
New and existing home sales in the U.S. were about $1.1 trillion last year, including $149 billion of new homes sold, broker Cushman & Wakefield Inc. estimated, based on U.S. Bureau of Census data.
China’s existing-homes market is about one-third of new homes by sales, according to Centaline, because the nation only allowed private home ownership in 1998. The government doesn’t release data on existing-home sales.
Home sales will continue to rise this year because of economic growth, supportive credit environment and government reforms including the easing of the one-child policy, said Sigrid Zialcita, head of Asia research at Cushman, in an e-mailed reply.
Home sales rose at a rate of about 30 percent each year from 1998 to 2009, according to Centaline, China’s biggest real estate brokerage. The annual rate has slowed to about 10 percent since 2010, according to the brokerage.
They won’t continue growing as fast given their already rapid increase and government curbs, said Liu Yuan, a Shanghai-based researcher at Centaline. Growth in the early 2000s was driven by tax rebates and other incentives to encourage home buying as the nation’s property market was opened to private ownership, he said.
The risk of Thailand defaulting on its debt is the highest since August as anti-government protests prompt money managers to sell the nation’s assets.
The cost of protecting the nation’s debt soared after investors including Wells Fargo Inc. pulled more than $4 billion from Thai stocks and bonds since Oct. 31, as rallies clogged up Bangkok roads and clashes claimed eight lives. Pacific Investment Management Co., Goldman Sachs Group Inc. and Kokusai Asset Management Co. reduced debt holdings before protests first erupted in late October, regulatory filings show.
“We sold the entire Thai position in our international bond fund through the end of last year,” Lauren Van Biljon, an analyst in London at Wells Fargo’s First International Advisors LLC unit, said in a Jan. 17 telephone interview. “There seems to be a very wide gulf between the different political sides.”
A resolution of the crisis has eluded Prime Minister Yingluck Shinawatra since she dissolved parliament in December and called a snap poll for Feb. 2. Protesters want to remove her and end the influence of her brother, Thaksin Shinawatra, who was ousted by the army in 2006. The baht has slumped on bets the central bank will cut borrowing costs this week as the turmoil crimps growth, and amid speculation about a coup.
“We have remained underweight on the baht since late last year as the prolonged political unrest hurt the currency outlook,” Tatsuya Higuchi, a money manager at Kokusai Asset in Tokyo, said in a Jan. 16 telephone interview. “There’s no fiscal support as the politics are in chaos. The only support they can provide under such a situation is monetary easing.”
Kokusai, Japan’s biggest mutual fund manager with $36 billion of assets, cut its Thai bond holdings last year and will keep its existing stake for now, he said.
Credit-default swaps insuring Thai debt against non-payment for five years rose to 153 on Jan. 14 in New York, the highest level since Aug. 28, according to CMA prices. The spread has widened 42 basis points since anti-government protest broke out on Oct. 31, compared with increases of 22 basis points for Indonesia and 17 basis points for the Philippines.
The cost of protecting Thailand’s debt may reach 200, the highest since November 2011, from 148 on Jan. 16, according to Nordea Markets, a unit of northern Europe’s biggest financial group, which had about 228 billion euros ($310 billion) of assets under management as of Sept. 30.
“The upside risk to the CDS level is still pretty big, given the risk of military intervention,” Amy Zhuang, a senior Asian markets analyst in Copenhagen at Nordea, said in a Jan. 15 telephone interview. “The uncertainty is there, the turmoil is there. They are generally still calm but the risky and tricky parts haven’t fully played out at the moment.”
Global funds have sold $2.8 billion more local stocks than they bought and a net $1.3 billion of bonds since Oct. 31, data from the stock exchange and the Thai Bond Market Association show. The baht fell 5 percent in the period and touched 33.148 per dollar on Jan. 6, the weakest since 2010, while the SET Index of domestic shares dropped 10 percent.
The Bank of Thailand will lower its benchmark one-day repurchase rate to 2 percent from 2.25 percent on Jan. 22, according to nine of 12 economists surveyed by Bloomberg News. Three predict no change. The central bank delivered a surprise 25-basis point cut at its last meeting on Nov. 27.
The monetary authority has lowered its 2014 growth projection to about 4 percent from 4.8 percent, saying the unrest will hurt investment and business confidence. Thailand’s finance ministry on Jan 16 cut its forecast for the second time in a month, reducing it to 3.1 percent after cutting to 4 percent from 5.1 percent on Dec. 26.
Yingluck’s administration has endured more than two months of street demonstrations aimed at erasing her family’s political influence. Her brother’s allies won the past five elections.
The demonstrators led by former lawmaker Suthep Thaugsuban want Yingluck to step down and allow an unelected council to reform the electoral system before holding a fresh vote. The main opposition Democrat Party will boycott the Feb. 2 poll, its leader and former Prime Minister Abhisit Vejjajiva said Dec. 21.
“Things are going from bad to worse,” Nicholas Spiro, managing director of investment consultancy Spiro Sovereign Strategy in London, said in a Jan. 15 e-mail interview. “The risk of another military coup is growing given the bleak prospects for a negotiated solution,” he wrote, adding that “stability and democratic governance are being undermined at a particular inopportune time from a market standpoint.”
Thailand’s army chief last month refused to rule out the possibility of a coup. The country has had nine coups and more than 20 prime ministers since 1946.
For now, the blockades in Bangkok haven’t done enough damage to the economy to alter its sovereign rating, Steffen Dyck, an analyst at Moody’s Investors Service, said at a Jan. 17 media briefing in Singapore. There are “very low” chances of a change to its ranking in the next 18 months, he said.
Thailand is rated Baa1 by Moody’s and BBB+ by Standard & Poor’s and Fitch Ratings, their third-lowest investment grades.
“In terms of growth, I can’t see it dropping below 3 percent,” Dyck said. “Manufacturing is still going on. We have seen some weakening in foreign reserves as protests intensified, but the stock market is much higher compared to instances in 2006 or 2008.”
Dollar-denominated debt sold by Thai companies handed investors a 1.3 percent loss since the crisis flared on Oct. 31, according to JPMorgan Chase & Co.’s Asian Credit Index, making it the region’s worst performer after Indonesia.
The average yield on the nation’s debt climbed 35 basis points, or 0.35 percentage point, in the period to 4.96 percent on Jan. 16. It reached 5.07 percent on Jan. 9, the highest since Sept. 18. The yield on Thai Oil Pcl’s 4.875 percent note due Jan. 2043 climbed to 6.31 percent from 5.98 percent on Oct. 31.
Cost of Stalemate
The political stalemate is costing Southeast Asia’s second-biggest economy as much as 1 billion baht ($30 million) a day as tourism suffers, the University of Thai Chamber of Commerce estimated as Singapore Airlines Ltd., Cathay Pacific Airways Ltd. and PT Garuda Indonesia reduced flights to Bangkok.
“The biggest casualty of a further escalation in the crisis is Thailand’s economy, which has already slowed dramatically,” Spiro said. “Tourism and infrastructure investment are increasingly at risk, putting pressure on the central bank to trim rates again to help shore up growth.”
Efforts to rid the world of hunger face “immense challenges” as farmers deal with resource scarcity, climate change and loss of soil fertility, agriculture ministers from 65 countries said.
Economic and financial crisis and “excessive” price swings create uncertainty that endangers investment in agriculture, the policy makers gathered in Berlin wrote in a joint statement published by the German agriculture ministry and dated yesterday.
Food production will have to rise 60 percent between now and 2050 as the world population expands to 9 billion, the United Nations’ Food & Agriculture Organization estimates. The FAO estimates about 870 million people were undernourished in 2010-12. International food prices in the past three years have been higher than ever before, FAO data show.
“We know that we are facing immense challenges,” the ministers wrote. “We regard the eradication of hunger and malnutrition, and the realization of the human right to food, as one of the greatest goals in the world.”
The ministers wrote their mission is “to highlight how fundamental agriculture is in contributing towards eradicating hunger and malnutrition.”
As uncertainty puts further agricultural investment at risk, that may in turn reduce the efficiency of the entire food system, the ministers wrote.
“We must enable agriculture to adapt to new conditions, deal with risks and recover quickly from crises.”
Eradicating hunger and malnutrition will require “deeper” national and international cooperation, according to the statement. Government, civil society, companies and academia will need to share responsibility to achieve that goal, the ministers wrote.
“Progressive scarcity of natural resources, the negative impacts of climate change, extreme natural disasters, and the loss of genetic diversity and soil fertility prevent agricultural potential from being fully realized,” according to the statement.
The countries represented in Berlin included France, Brazil, India, Japan and Canada. The U.S., the world’s biggest farm exporter, wasn’t represented at ministerial level, a list of participants showed.