樓市大地震！香港取消印花稅，加入房地產搶錢大戰！萬科“斷臂求生”，是否窮途末路？｜米國路邊社 [20240229#537]

Summary

The real estate markets in China's major cities have seen plunging sales in the first two months of 2024 compared to last year. Developers like Wanda are selling prime assets to stay afloat amidst falling revenues. Meanwhile, Hong Kong has scrapped all stamp duties to lure mainland buyers, intensifying competition. Though national policies may have limited effects, inter-city competition continues. Smaller cities offer perks like covering down payments to retain local buyers. Prices likely haven't bottomed out yet, so prospective buyers may want to wait for new policies before deciding.

Takeaways

• 😟 China's property market is struggling - top developers saw sales plunge nearly 50% in Jan-Feb 2022 vs 2021
• 😤 Despite easing policies, China's new home sales keep falling while second-hand home sales rise
• 😨 Major developers like Vanke are selling top assets to stay afloat - sign that housing market hasn't bottomed yet
• 😠 Falling home sales are squeezing developers' cash flow
• 🏠 Hong Kong has scrapped all stamp duties to lure mainland Chinese buyers
• 💸 Hong Kong property has higher rental yields vs mainland China top cities
• 🌇 Hong Kong dollar is pegged to the US dollar so seen as safer asset than RMB
• 😎 Easier mortgage rules in HK compensate for higher interest rates
• 🔄 Mainland cities will likely roll out more stimulus policies to compete with HK
• 😫 Smaller mainland cities have exhausted policy options and face ghost town risk

Q & A

What was the year-over-year drop in sales for top 100 Chinese real estate companies in January-February 2024?

Top 100 Chinese real estate companies saw their sales plummet by 48.8% in January-February 2024 compared to the same period in 2023.

Why are second-hand home sales rising in first-tier Chinese cities while new home sales are falling?

Second-hand home prices are more negotiable and can go much lower as sellers want to offload properties quickly. This makes them a better value buy than new builds which have less room for price cuts due to costs and policy restrictions.

Why did China Vanke sell 50% of its stake in a top commercial property project at a 26.3% discount?

As a traditionally conservative company focused on survival, Vanke likely wanted to liquidate a top asset while valuations were still high to stockpile cash, brace for a prolonged industry downturn, and make it through the winter.

What signs suggest Vanke is not at immediate risk of default despite asset sales?

Vanke has a reasonable 53.9% debt level and enough cash to cover short-term obligations 2.2x over. This indicates it is not facing imminent default risk.

How does Hong Kong aim to attract Chinese buyers after removing all property taxes?

By removing taxes up to 30% of home values and relaxing mortgage rules, Hong Kong hopes to entice mainland Chinese buyers priced out or frustrated by restrictions in first-tier mainland cities.

What are Hong Kong’s advantages over mainland cities for Chinese property buyers?

Higher rental yields around 3% vs 1.5% mainland, pegged currency insulating assets from RMB fluctuations, and a freer market.

What is Hong Kong’s main disadvantage compared to mainland cities from a property investment view?

Higher mortgage rates around 4.5-4.8% on 10-30 year loans due to Hong Kong following US Fed policy vs lower mainland China rates.

How might Hong Kong’s policy changes impact mainland Chinese cities’ real estate markets?

If sizable capital flees higher mainland property restrictions for better Hong Kong returns, mainland markets may weaken further. Coastal cities could react by relaxing their own rules.

Will stimulus across Hong Kong and mainland cities reverse the broader Chinese property downturn?

No, as China’s economy hasn’t bottomed out yet. But locally it may prop up struggling markets as players compete - large cities eating smaller ones.

How are small Chinese towns trying to keep property demand as buyers flee to other areas?

Some local governments have set up funds to lend buyers down payments or even cover their mortgages directly if unable to repay on time.