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  • Re : International Realty News & Trends

    China allows property developers to access some pre-sale funds

    Read more at:
    https://realty.economictimes.indiati...funds/95514819



    The notice follows an extensive package outlined by Chinese regulators to shore up financing in the struggling property sector. Chinese property stocks and bonds surged on Monday as the market cheered the measures.


    BEIJING: China's financial regulator will allow property developers to access some pre-sale housing funds, it said in a notice published on Monday, the latest move to ease a liquidity crunch which has plagued the real estate sector since mid-2020.

    The notice follows an extensive package outlined by Chinese regulators to shore up financing in the struggling property sector. Chinese property stocks and bonds surged on Monday as the market cheered the measures.

    Commercial banks are allowed to issue letters of guarantee to real estate firms for escrow pre-sale housing funds, according to the notice published by China's Banking and Insurance Regulatory Commission (CBIRC).

    The funds obtained by real estate companies from escrow funds accounts shall be prioritised to construct projects and repay debts, said the notice.

    Real estate companies are banned from using the funds for land acquisition, new investment or repayment loans by shareholders.

    Property developers can sell residential projects before completing them but are required to put those funds in escrow accounts.

    China's property sector, contributing roughly a quarter of China's $17 trillion of output, has struggled with defaults and stalled projects, hitting market confidence and weighing on growth.

    Previous efforts by policymakers to help ease the cash crunch have done little to bolster the property market.





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    • Re : International Realty News & Trends

      New Zealand house prices see biggest fall since the 1990s

      Residential houses can be seen along a road in a suburb of Auckland in New Zealand, June 24, 2017. Picture taken June 24, 2017. REUTERS/David Gray/File Photo

      WELLINGTON, Nov 15 (Reuters) - The New Zealand house price index saw its largest drop in 30 years last month and sales activity was particularly soft, fuelling expectations that prices might fall further than many economists had previously forecast.

      The house price index, which measures changes in house prices on a like for like basis, fell for the 11th consecutive month and is now down 10.9% on October last year, according to data released by the Real Estate Institute of New Zealand on Tuesday. The median house price was down 7.9% on October last year.

      Kiwibank economists said the house price data was a sobering read with the fall in the index its biggest since the early 1990s. "Rising mortgage rates continue to weigh on house prices and sale activity," they said in a note.

      House prices in New Zealand rose roughly 40% over the pandemic before peaking last November at levels repeatedly described by the central bank as unsustainable. However, as the central bank has aggressively hiked the cash rate, and mortgage rates have followed suit, prices have come off sharply.

      Many economists expect that with the cash rate forecast to go higher, house prices still have further to fall.

      Westpac said on Tuesday it now expects house prices to drop 20% from their peak, having previously forecast a 15% fall.

      In its quarterly economic update, Westpac said 'real' house prices were in fact set were set to fall by 30% from their 2021 peak, given high inflation more broadly in New Zealand.

      Advertisement · Scroll to continue

      "That would completely erase the gains that we saw in recent years and take real house prices back to the levels we saw prior to the pandemic," it noted.

      New Zealanders have a lot of wealth tied up in the housing market and falling house prices are expected to knock confidence and drag on spending in the coming months. Reporting by Lucy Craymer; Editing by Leslie Adler and Lincoln Feast







      New Zealand house prices see biggest fall since the 1990s | Reuters
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      • Re : International Realty News & Trends

        China's home prices see biggest fall in seven years, recovery bumpy

        Read more at:
        https://realty.economictimes.indiati...bumpy/95583049



        New home prices slumped 1.6% year-on-year after a 1.5% fall in September, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Wednesday.


        BEIJING: China's new home prices fell at their fastest pace in over seven years in October, weighed down by COVID-19 curbs and industry-wide problems, reflecting a deepening contraction that prompted authorities to ramp up support for the sector in recent days.

        New home prices slumped 1.6% year-on-year after a 1.5% fall in September, according to Reuters calculations based on National Bureau of Statistics (NBS) data on Wednesday. That was the biggest annual drop since August 2015 and the sixth month of contraction.

        Regulators outlined 16 measures as part of a rescue package on Sunday aimed at boosting liquidity in the property sector, including loan repayment extensions. Markets cheered the measures, which sent property stocks soaring on Monday.

        In an effort to relieve the liquidity crunch, China's banking and insurance regulator also said on Monday it would allow property developers to access some pre-sale funds.

        But analysts worry the support measures could be ineffective because they are not targeting weakening demand and think the recovery is likely to be bumpy, as evidenced by downbeat property figures earlier this week.

        "It should be noted that the current problem facing the real estate industry is no longer just for property, but more of economic income expectations," said Zhang Dawei, chief analyst at property agency Centaline.

        "In the short term, the property market will remain in the doldrums in the fourth quarter."

        China's property sector has struggled with defaults and stalled projects since authorities started to clamp down on excessive leverage in mid-2020, hitting market confidence and weighing on economic activity.

        New home prices declined 0.3% month-on-month after easing 0.2% in September. Out of the 70 cities surveyed by NBS, 58 reported month-on-month price falls in October, up from 54 cities in September.

        Data on Tuesday also pointed to further weakness in the cash-strapped sector, showing property investment fell at its fastest pace in 32 months in October and sales slumped for the 15th straight month.

        The softer data comes even as more than 200 local governments have taken steps to revive the sector this year, including relaxing mortgage rates and refunding individual income tax for some homebuyers.

        "Considering the protracted disruptions from dynamic zero-Covid policy, falling and unbalanced demographic demand, and policymakers' long-held stance that 'housing is for living in, not for speculation', we maintain our view that the property sector recovery should be gradual and bumpy," said Goldman Sachs analysts in a note on Wednesday.
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        • Re : International Realty News & Trends

          Existing home sales in U.S. drop 5.9% in October 2022

          Read more at:
          https://realty.economictimes.indiati...-2022/95625868




          House resales, which account for a big chunk of U.S. home sales, slumped 28.4% on a year-on-year basis in October. That was the largest drop since February 2008.


          WASHINGTON: U.S. existing home sales tumbled for a record ninth straight month in October as the 30-year fixed mortgage rate hit a 20-year high and prices remained elevated, pushing homeownership out of the reach of many Americans.

          Despite the broad decline in sales reported by the National Association of Realtors on Friday, housing supply remained tight, with considerably fewer homes coming on the market than in the prior year. The housing market has been the sector hardest hit by aggressive Federal Reserve interest rate hikes that are aimed at quelling high inflation by dampening demand in the economy.

          "The combination of rising house prices and mortgage rates have sent housing affordability plummeting," said Daniel Vielhaber, an economist at Nationwide in Columbus, Ohio. "The decline in affordability is by design to some extent. The Fed's goal of slowing economic demand by raising interest rates starts with home sales."

          Existing home sales dropped 5.9% to a seasonally adjusted annual rate of 4.43 million units last month. Outside the plunge during the initial phase of the COVID-19 pandemic in the spring of 2020, this was the lowest level since December 2011.

          Economists polled by Reuters had forecast home sales would tumble to a rate of 4.38 million units.

          House resales, which account for a big chunk of U.S. home sales, slumped 28.4% on a year-on-year basis in October. That was the largest drop since February 2008.

          The report followed on the heels of news on Thursday that single-family homebuilding and permits for future construction tumbled to the lowest levels since May 2020. Housing inventory also declined.

          The 30-year fixed mortgage rate breached 7% in October for the first time since 2002, according to data from mortgage finance agency Freddie Mac. The rate averaged 6.61% in the latest week. The U.S. central bank's rate-hiking cycle, the fastest since the 1980s, has raised the risks of a recession.

          A separate report from The Conference Board on Friday showed the leading indicator, a gauge of future U.S. economic activity, declined 0.8% in October after sliding 0.5% in September. The index has now dropped for eight straight months.

          "The trajectory for growth looks weak," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. "A deteriorating housing market, nagging inflation and an aggressive Fed puts the economy on unsure footing for 2023."

          Stocks on Wall Street rose. The dollar was steady against a basket of currencies. U.S. Treasury prices fell.

          Multiple offers

          Existing home sales dropped sharply in all four regions. Sales also declined across all price points on a year-on-year basis. Even as demand weakens, housing supply remains tight, limiting the slowdown in house price inflation.

          The median existing house price increased 6.6% from a year earlier to $379,100 in October. That marked 128 straight months of year-over-year house price increases, the longest such streak on record. Though price growth has slowed from June's peak, in line with normal trends, the NAR estimated that prices in October were considerably above their pre-pandemic level.

          The realtors group also reported multiple offers continued in some areas and 24% of homes sold last month were above the asking price, reflecting the still-tight inventory environment. On the other hand, homes unsold after more than 120 days saw prices reduced by an average of 15.8%.

          There were 1.22 million previously owned homes on the market, down 0.8% from both September and a year ago.

          New listings were about 10% to 20% lower in most areas compared to October 2021. Higher borrowing costs are discouraging homeowners, who would normally want to downsize or upgrade, from putting their houses on the market.

          At October's sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 2.4 months a year ago. That rise was mostly due to fewer buyers being in the market. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.

          Properties typically remained on the market for 21 days last month, up from 19 days in September. Sixty-four percent of homes sold in October 2022 were on the market for less than a month.

          First-time buyers accounted for 28% of purchases, down from 29% in September and a year ago. All-cash sales made up 26% of transactions, up from 24% a year ago.

          "Recent downward movement in mortgage rates might provide some reprieve in the coming months, but with home values appearing to hold strong, affordability challenges remain top of mind," said Nicole Bachaud, senior economist at Zillow in Seattle.
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          • Re : International Realty News & Trends

            Collaboration: the key to weathering the private rental crisis

            21st November 2022 Blog, Feature
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            By Richard Dawson, Rental Sector Expert, RentGuarantor

            The Private Rental Sector (PRS) is undeniably in need of some assistance, as recent changes to legislation and global events have put increased pressure on landlords, driving many out of the market. This has been reflected in a recent Propertymark report, which shows the average number of tenants per branch has reached a new peak of 144, without the supply of lettings properties increasing. The lack of housing is leading to growing uncertainty in the PRS, as bidding wars ensue for the homes that are available and rental prices are inevitably driven higher – something that is far from desirable amid a cost-of-living crisis.

            With the government whitepaper, A Fairer Private Rented Sector, outlining further restrictions for the PRS, we are expecting to see more landlords exit the market. This will continue to reduce the supply of privately rental homes and only serve to exacerbate this crisis further.

            Ultimately, we need to see additional government support provided to the sector. The PRS is calling for legislation to fully regulate the market and more investment is required to advance plans to build new homes. But with the UK economy heading towards recession, assistance is unlikely to reach the sector any time soon. In order to see the PRS through the difficult times ahead, landlords and estate agents must work together to support tenants, protect the industry and drive future changes.

            Strengthening the landlord and lettings agent’s relationship

            While there is already a great deal of collaboration between landlords and lettings agents, this relationship can be built upon further, to create mutual benefits for both parties and the sector as a whole.

            One way in which this can be achieved is through sharing education and guidance. With years of experience behind them, lettings agents have a wealth of industry knowledge, which can be particularly useful in supporting first-time landlords entering the market. Many who are new to this territory, particularly those who have inherited a property or are taking on someone else’s responsibilities, aren’t fully au fait with the rules and regulations in place – particularly those recently introduced. While managed services can provide additional peace of mind to new landlords, offering to educate around best practices and industry requirements will help them get things right first time around and attract more property owners to the market.

            Additionally, property owners and lettings agents can come together to provide an immediate solution to the diminishing rental stock. We’re not suggesting they head down to a site and start laying bricks together, but with nearly 38% of homes in England being under occupied – meaning they have two or more spare rooms – there is clearly space available. To provide additional housing options, landlords could consider discussing the possibility of offering rooms with existing tenants that may have extra space, in turn lowering their rent. Lettings agents can also assist by increasing the options available for homeowners to list an individual room to rent and adding more lodger sourcing services. Not only will this increase available housing, it can also offer homeowners a way to subsidise their income, with a tax exemption on earnings up to £7,500 through the ‘Rent a Room’ scheme.

            A wealth of new offerings have become available to the PRS, ranging from rent guarantor services to tenant’s insurance, that can provide tenants with additional levels of security. By collaboratively offering these additional services, landlords and estate agents will not only be providing a better service to those renting their properties, but they will also reap the benefit of increased financial security on their own investments.

            A united front

            Alongside the immediate support needed in the PRS, a push towards a solution that will protect the sector’s future is necessary. While the initiatives outlined in the Renter’s Reform Bill are a step in the right direction, the adverse effect of driving landlords out of the market is further damaging the sector, bringing it to the verge of crisis.

            Legislation to regulate the whole rental sector in England, alongside further plans to build more housing for the rental markets, is what is truly needed. This will help ensure everyone working within the industry is licensed, adheres to a strict code of practice, and holds a minimum of a level three qualification – leading a fairer sector, not only for tenants, but for landlords and estate agents as well.

            The Regulation of Property Agents Working Group (RoPA) have long called for government regulation and by supporting these movements, industry leaders can help drive the real change needed in the sector.

            Driving change together

            Though there is uncertainty in the future of the PRS, caused by a reduction in available housing, changing legislation and an increased cost-of-living, there are ways in which the sector can be supported by those within.

            Through offering each other mutual support, landlords and estate agents can begin to drive the change needed within the sector and influence government bodies to act accordingly. In addition, through the provision of additional support and security to their tenants, both parties can further secure their own properties and income.












            Collaboration: the key to weathering the private rental crisis - PropertyWire
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            • Re : International Realty News & Trends

              Spain to approve mortgage support for more than one million households

              Read more at:
              https://realty.economictimes.indiati...holds/95687588



              The new measures are expected to be approved at a cabinet meeting on Tuesday pending final negotiations with banking associations, the ministry said.

              MADRID: The Spanish government and banks have agreed in principle on mortgage relief measures such as extending loan repayments for more than one million vulnerable households and on help for middle-class families, the economy ministry said on Monday.

              The new measures are expected to be approved at a cabinet meeting on Tuesday pending final negotiations with banking associations, the ministry said.

              The Economy Ministry did not provide details on the potential cost to lenders and the degree to which banks may have to set aside more provisions in the future remains unclear.

              Yet non-performing loans at Spanish lenders as of August stood at nearly record lows of 3.86%, far below the all time-high of 13.6% of December of 2013.

              In Spain, around three-quarters of the population are homeowners, with most opting for floating-rate mortgages which are exposed to interest rate rises.

              The planned measures are part of a wider package of support to help ease cost of living pressures which includes a rebate on fuel costs and windfall tax proposals . Other countries, such as Hungary, Portugal, Poland and Greece, have approved different forms of mortgage support.

              In Spain, banks will provide mortgage support for vulnerable families through an amended industry-wide code of good practice. The income threshold has been set at 25,200 euros ($25,815).

              Vulnerable households will be able to restructure mortgages at a lower interest rate during a five-year grace period, already set out in a 2012 industry-wide code of good practice, which is voluntary but becomes mandatory once lenders adhere to it.

              Grace periods allow borrowers to delay payments on the principal of the loan without being charged late fees and to avert default or loan cancellation.

              The period for cancelling debt has been extended by two years and includes the possibility of a second restructuring, if necessary, the ministry said.

              Vulnerable families that spend more than 50% of their monthly income to repay their mortgage, but do not meet the condition set out in the previous code of a 50% rise in their mortgage payments, can take advantage of a two-year grace period.

              The government will also implement a new code of good practice for middle-class families at risk of vulnerability, setting the income threshold at less than 29,400 euros.

              In those cases, lenders must offer the possibility of a 12-month freeze on repayments, a lower interest rate on the deferred principal and an extension of the loan if a mortgage burden represents more than 30% of household income and the cost has risen by at least 20%.

              Measures will also make it less costly for families to switch from variable-rate mortgage contracts to those with fixed rates.

              The mortgage relief is expected to come into effect next year.











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              • Re : International Realty News & Trends

                Three of China's biggest banks to provide support for builders

                Read more at:
                https://realty.economictimes.indiati...lders/95719075



                Bank of Communications Co Ltd (BoCom) said it agreed to provide a 100 billion yuan ($13.98 billion) line of credit to Vanke and a 20 billion yuan line of credit to Midea Real Estate Holding Ltd, two separate statements issued by the bank said on Wednesday.


                BEIJING: Three of China's biggest commercial banks have agreed to provide fundraising support to property developers, including industry giant Vanke , in a coordinated effort to support the country's embattled property sector.

                It marks one of the latest moves by state-owned banks to respond to Beijing's call to ease pressure on debt-laden developers and reverse a housing slump.

                The property sector makes up about a quarter of China's economy.

                Bank of Communications Co Ltd (BoCom) said it agreed to provide a 100 billion yuan ($13.98 billion) line of credit to Vanke and a 20 billion yuan line of credit to Midea Real Estate Holding Ltd, two separate statements issued by the bank said on Wednesday.

                Under the agreements, BoCom will be likely to offer the two developers property development loans, loans for M&A deals and bond investments.

                The agreement is part of BoCom's efforts to implement 16 measures outlined by Chinese regulators that aim to boost liquidity in the property sector, the bank said in the statements.

                "BoCom will continue to fulfill the responsibility of a state-owned bank, (and) accurately promote high-quality economic development with high-quality financial services," it said.

                Also on Wednesday, Agricultural Bank of China Ltd (AgBank) said it has signed strategic agreements to provide fundraising support to five property companies, including Vanke, Longfor Group Holdings Ltd and China Resources Land Ltd. The bank did not give further details on the scale of the support.

                Bank of China Ltd also said on Wednesday it agreed to provide a line of credit of up to 100 billion yuan to Vanke.

                Vanke is the country's second-largest developer by sales.

                China's property sector, once a pillar of growth, has slowed sharply this year due to government efforts to restrict excessive borrowing by developers.

                The clampdown has triggered falls in property investment, sales and prices, and a growing number of bond defaults. Construction of many housing projects has stalled, scaring away potential home buyers.

                Chinese authorities have announced a flurry of fiscal measures recently to ease the developers' liquidity crisis.

                In the latest policy move, China's central bank will provide 200 billion yuan in loans to six commercial banks for housing completions, according to a deputy central bank official quoted by the state-run Economic Daily on Monday.

                In response to Beijing's policy guidance, more banks are expected to sign agreements with developers to increase real estate loan issuance, said Liu Shui, an analyst at China Index Academy.

                Many analysts, however, believe the property market will take a long time to recover.

                "(A) broad recovery in new-home sales remains the key for a sustained improvement in developers' liquidity profiles," a Fitch Ratings report said on Wednesday.

                "We expect no material improvement in the operating environment, as homebuyers' confidence remains fragile amid weak economic prospects and uncertainty surrounding delivery of pre-sold properties," the Fitch report said.
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                • Re : International Realty News & Trends

                  High mortgage rates send homebuyers scrambling for relief

                  Read more at:
                  https://realty.economictimes.indiati...elief/95742653




                  A recent snapshot by the Mortgage Bankers Association showed that ARMs accounted for 12.8% of all home loan applications in the week ended Oct. 14.


                  LOS ANGELES: Mortgage rates are more than double what they were a year ago, so many homebuyers are looking for ways to put off some of the pain for a few years.

                  The trend has driven adjustable-rate mortgages, or ARMs, to the highest usage in over a decade.

                  A recent snapshot by the Mortgage Bankers Association showed that ARMs accounted for 12.8% of all home loan applications in the week ended Oct. 14. The last time these loans made up a bigger share of all mortgage applications was in the first week of March 2008.

                  At the start of the year ARMs represented only 3.1% of all mortgage applications. The average rate on a 30-year fixed-rate mortgage then was 3.22%, while last month that rate topped 7% - the highest since 2002.

                  This week, the average rate for a 30-year mortgage fell to 6.58 %, according to mortgage buyer Freddie Mac. A year ago, it was 3.1%.

                  Mortgage rates' swift rise follows a sharp increase in the yield on the 10-year Treasury note, which has climbed amid expectations of higher interest rates overall as the Federal Reserve has hiked its short-term rate in a bid to crush the highest inflation in decades.

                  As mortgage rates rise, they can add hundreds of dollars to monthly mortgage payments. That's a significant hurdle for many would-be homebuyers, resulting in this year's housing downturn. Last month, sales of previously occupied U.S. homes fell for the ninth consecutive month. Annual sales are running at the slowest pre-pandemic pace in more than 10 years.

                  For house hunters still able to afford a home at current elevated mortgage rates, reducing their monthly payments with an adjustable-rate loan for the first few years can help give them financial flexibility.

                  A homebuyer who takes out a typical 5/1 ARM, for example, will have a low, fixed rate for the first five years of the loan. After that, the loan shifts to an adjustable interest rate, which could be higher or lower, until the debt is paid off, or the buyer refinances the loan.

                  Another approach that's become popular recently is buying down the interest rate on a fixed-rate 30-year loan for the first two or three years.

                  Buying down the rate on a 30-year mortgage can make monthly payments more manageable -- something both homebuilders and homeowners are offering to entice buyers as the housing market slows.

                  Let's say a borrower takes out a 30-year mortgage with a 6% fixed rate. With what's known as a 3-2-1 rate buydown, that homebuyer's interest rate would be 3% in the first year of the loan, 4% in the second and 5% in the third, saving them potentially thousands of dollars along the way.

                  The borrower must still qualify for the full monthly payment before the buydown adjustment, however.
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                  • Re : International Realty News & Trends

                    China's central bank to offer cheap loans to support builders' bonds: Sources

                    Read more at:
                    https://realty.economictimes.indiati...urces/95781143



                    China has stepped up support in recent weeks for the property sector, a pillar accounting for a quarter of the world's second-biggest economy. Many developers defaulted on their debt obligations and were forced to halt construction.


                    HONG KONG | SHANGHAI: China's central bank will offer cheap loans to financial firms for buying bonds issued by property developers, four people with direct knowledge of the matter said, the strongest policy support yet for the crisis-hit sector.

                    The People's Bank of China (PBOC) hopes the loans will boost market sentiment toward the heavily indebted property sector, which has lurched from crisis to crisis over the past year, and rescue a number of private developers, said the people, who asked not to be named as they were not authorised to speak to the media.

                    China has stepped up support in recent weeks for the property sector, a pillar accounting for a quarter of the world's second-biggest economy. Many developers defaulted on their debt obligations and were forced to halt construction.

                    The country's biggest banks this week pledged at least $162 billion in credit to developers.

                    The PBOC loans, through its relending facility, are expected to be at much lower than the benchmark interest rate and would be implemented in the coming weeks, giving financial institutions more incentive to invest in private developers' onshore bonds, two sources said.

                    Terms such as the interest rate on the loans were not immediately known.

                    The PBOC is also drafting a "white list" of good-quality and systemically important developers that would receive wider support from Beijing to improve their balance sheets, two of the sources said.

                    The central bank did not immediately respond to a request for comment on the planned measures.

                    At least three private developers - including Longfor Group Holdings Ltd, Midea Real Estate Holding Ltd and Seazen Holdings - received the green light this month to raise a total of 50 billion yuan ($7 billion) in debt.

                    If there were not enough demand from investors for such new bonds, the PBOC would likely step in to provide liquidity via the relending facility for the rest of the issuance, said one of the four people and another source.

                    Hong Kong's Hang Seng Mainland Properties Index was up as much as 4.7% on Friday, adding 1 percentage point after Reuters reported the PBOC moves. China's top developer by sales, Country Garden, was up 10%, CIFI Holdings was up more than 5% and Longfor nearly 4%.

                    From crackdown to aggressive support

                    Relending is a targeted policy tool the PBOC typically uses to make low-cost loans to banks to support the slowing economy, as the central bank faces limited room to cut interest rates on concerns about capital flight.

                    The PBOC in recent months has used the relending facility to support sectors including transport, logistics and tech innovation that were hard hit by the COVID-19 pandemic or are favoured by long-term state policies.

                    Beijing's aggressive support for the property sector marks a reversal from a crackdown begun in 2020 on speculators and indebted developers in a broad push to reduce financial risks.

                    As a result of the crackdown, though, property sales and prices fell, developers defaulted on bonds and suspended construction. The construction halts have angered homeowners who have threatened to stop mortgage payments.

                    The PBOC also plans to provide 100 billion yuan ($14 billion) in M&A financing facilities to state-owned asset managers mainly for their acquisitions of real estate projects from troubled developers, two sources said.

                    Chinese media reported on Monday the central bank planned to provide 200 billion yuan in interest-free relending loans to commercial banks through the end of March for housing completions.

                    Among other recent official support, China's interbank bond market regulator said this month it would widen a programme to support about 250 billion yuan ($35 billion) of debt offerings by private firms.

                    Much of Beijing's previous support targeted state-owned developers.

                    Yi Huiman, chairman of China's securities regulator, said on Monday the country must implement plans to improve the balance sheets of "good quality" developers.

                    Fitch Ratings said on Thursday private Chinese developers face higher liquidity risk, in terms of debt structure with greater short-term maturity pressure, than state-owned peers as banks and other creditors are becoming reluctant to lend.
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                    • Re : International Realty News & Trends

                      In tough housing market, mortgage rate buydowns gain momentum


                      React Comments
                      Amid higher mortgage rates and a cooling housing market, some home sellers are wooing buyers with a freshly popular incentive: paying for a temporary reduction to the buyer’s mortgage interest rate.

                      Why are buydowns popular now?


                      In one common scenario, known as a 2/1 buydown, the seller pays to cut the buyer’s mortgage rate by 2 percentage points for the first year of the loan and by 1 percentage point for the second year.

                      As rates have surged to 7 percent, that buydown helps reduce some of the sticker shock buyers are experiencing.

                      “Temporary rate buydowns have been around for a long time, but they’re really only relevant in a market like this, where rates are flying off the handle,” says Dan Catinella, chief lending officer at Total Expert, a company that sells marketing software to mortgage companies.

                      Some of the nation’s largest lenders, including Rocket Mortgage, United Wholesale Mortgage and Guaranteed Rate, have begun marketing the tactic. Rocket Mortgage advertises its buydown program as an “Inflation Buster.” True to the name, the buydown could reduce the buyer’s monthly mortgage payment by hundreds of dollars.

                      “A buydown is a way for buyers to feel a little more comfortable,” says Eric Hamilton, senior vice president of mortgage lending at Guaranteed Rate.

                      During the pandemic-driven housing boom, sellers hardly needed to do anything to unload their homes quickly and for a hefty premium. This year, the housing market has slowed sharply, and sellers face a new reality.

                      “Bidding wars are starting to go away,” says Catinella. “Sellers are starting to have open houses. Homes are sitting on the market longer.”

                      As the market starts to reset, buyers are asking for concessions, feel less pressure to bid aggressively and have more time to weigh their options — and negotiate for a better deal.

                      “Buyers don’t have to go through all these crazy inspection waivers and appraisal waivers,” says Elena Sarantidis, a mortgage broker with Prime Plus Loans in Wellington, Florida.

                      How do rate buydowns work?


                      Say a buyer plans to pay $375,000 for a home, make a 20 percent down payment and finance the remaining $300,000 with a mortgage.

                      The monthly payment on a $300,000 loan at 7 percent is $1,996. With a 2/1 buydown, the interest rate would fall to 5 percent for the first year, and the buyer’s payment would drop to $1,610 — a savings of $386 a month, or $4,632 that first year. The buyer still must qualify for the loan at the higher rate.

                      For the seller, the cost of a 2/1 buydown varies, but typically is a bit more than 2 percent of the amount of the loan. For a $300,000 mortgage, the seller would pay $6,000 to $7,000 into a buydown account that belongs to the buyer. A portion of that sum would be released each month to reduce the buyer’s monthly mortgage payments. If the buyer decides to refinance while there’s still money left in the account, the remaining balance would be applied to the new loan, Hamilton and Sarantidis say.

                      Mortgage lenders offer a variety of buydown options, including:
                      • 2/1 buydown: The borrower’s rate drops by 2 percentage points in the first year of the mortgage and by 1 point in the second year.
                      • 1/0 buydown: The borrower’s rate drops by 1 percentage point in the first year of the mortgage.
                      • 3/2/1 buydown: The borrower’s rate drops by 3 percentage points in the first year of the mortgage, 2 percentage points in the second year and 1 point in the third year. This option is costlier for the seller.
                      Rate buydowns have become a popular option for homebuilders, but others, like Realtors and lenders, can offer them too, says Sarantidis.

                      Why not just cut the sale price?


                      The most common way for sellers to close a deal with a reluctant buyer is to simply cut the price. Proponents of buydowns, however, say both sellers and buyers get more bang for their buck with a temporary rate buydown.

                      In the example of the $375,000 home and $300,000 mortgage, the buyer’s monthly payment would be $1,996. If the seller cut their price to $365,000 and the buyer financed $292,000 instead, the monthly payment would be $1,943. That savings of $53 a month might not look as attractive as the $386 savings with the 2/1 rate buydown.
                      No code has to be inserted here.“On a 30-year mortgage, the price cut is not going to make a big difference,” says Sarantidis. “In the short term, the buydown is a better savings.”

                      For builders, the appeal of a rate buydown is clear: If they cut the price now, they’ll feel pressure to do so for future buyers. The temporary buydown is a way to protect their pricing while also giving the buyer something of value.

                      How is a buydown different from paying points?


                      Some borrowers opt to pay discount points to lower their mortgage interest rate. Unlike a rate buydown that expires in a year or two or three, paying points permanently reduces the rate.

                      With points, however, the rate cut is less steep. Paying one discount point — 1 percent of the loan amount — reduces the rate by about a quarter of a percentage point.

                      Basically, points are a long-term play. If you plan to be in the home for a long time and not refinance, paying points — or asking the seller to pay them on your behalf — could be a better bet. If you expect rates to reverse course in the near future and therefore to refinance your loan, the short-term savings of a buydown could be a better deal. How is a buydown different from an ARM?


                      A temporary buydown has some of the same characteristics of an adjustable-rate mortgage (ARM): The borrower begins making payments at one interest rate, then the rate adjusts at a predetermined time down the road.

                      An ARM carries a fixed interest rate for a period of time, typically five years. After that, the interest rate and monthly payments can change every six months or year.

                      With a buydown, on the other hand, the interest rate is technically fixed — it’s just that the seller reduces the borrower’s interest payments for a set period.

                      Both buydowns and ARMs have grown more attractive as mortgage rates have swiftly gone up. However, buydowns look more appealing in the short run compared to ARMs.

                      “The problem is the yield curve is inverted,” says Hamilton, “so ARMs just don’t have the advantages they had in the past.”

                      In Bankrate’s Nov. 16 survey of lenders, the average rate on a 5/6 ARM was about 0.6 percentage point lower than the average rate on a 30-year mortgage, so a buydown could win on this front, too.

                      Bottom line


                      If you’re a seller looking to entice a buyer, consider paying for a temporary rate buydown. This move can cost you far less than a price cut. Ask your listing agent for advice — and keep in mind that this tactic has re-entered the mortgage market only recently, so many Realtors and loan officers are still learning how it works.









                      In tough housing market, mortgage rate buydowns gain momentum (msn.com)
                      Last edited 4 days ago.
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