Newsletter #87 - Evergrande crisis and the real estate industry

Evergrande and APAC's housing boom

This week, we peer into the windows of the real estate space. Analysts and real estate agents are saying the property market of APAC is now “on steroids” as housing prices have shot up in the region due to low interest rates.

And as you might have also heard, Evergrande, one of China’s leading real estate developers, is facing a debt crisis. What will happen next? Let’s dive in.

Working from home,
Team NC

🏘️ Asia's real estate: housing boom and bubble

#TRENDS

APAC’s property booms sees buyers bid up prices [CNBC]

Low interests, rising prices - Housing prices have shot up in APAC this year, fueled by record low interest rates amid the pandemic. South Korea, for instance, hiked interest rates for the first time in 3 years in August—analysts attributed the move to rising home prices and increasing debt.

Will housing prices rise further? - The overheating in property markets in some cities has led to expectations that governments will intervene to make housing prices fair and affordable.

New Zealand was expected to raise interest rates, but one Covid case set off a widening cluster of infections, leading to the central bank to hold rates steady instead. Over in Singapore, analysts expect more curbs ahead as the city-state’s leaders warned last year that home buyers should be cautious with the risk of rising interest rates.

#BUSINESS

What will happen if Evergrande collapses? [The Guardian]

Why is Evergrande in trouble? - In short, mounting debt. Evergrande’s trouble came after years of unrestrained expansion during which its debts grew alongside its size and assets. It is now labouring under a debt pile of more than $300bn.

Spillover consequences - Evergrande owes money to about 171 domestic banks and 121 other financial firms. If the company defaults completely and fails, a credit crunch would spell bad news for China and the global economy. Some investors believe this might become China's Lehman moment, referring to US investor bank Lehman Brothers' collapse in 2008 which led to a global financial crisis.

Bailout, breakup or default? - We’re still unsure if China’s government will be bailing out Evergrande from their crisis. Authorities are hoping, however, that asset purchases can mitigate any social unrest that could occur if Evergrande were to suffer a messy collapse.

#TECH

How AI proptech can instantly value properties around APAC [Tech Wire Asia]

Market intel at our fingertips - An AI-powered proptech platform called OfficeBlocks is eliminating the need to manually travel to properly assess real estate locations around APAC. OfficeBlocks’ aim is to make the process of research and making investment property decisions quickly, without the hassle of doing time-consuming groundwork.

How it works - Using the platform, a property investor can upload a photo of a property, and the industry-first AI and big data tool will send out the rental estimates and valuation of the property to an email address within minutes. And although the AI is retrained every week to be accurate, the platform isn’t meant to replace brokers, but to help them make more informed decisions.

📫 More reads - Moving out & making homes

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