Economy
Munich developer insolvent in latest blow to German property sector
© Reuters. FILE PHOTO: Construction sites are photographed in Frankfurt, Germany, July 19, 2023. Germany’s property sector is in stress, underscoring a major change of fortune for real estate in Europe’s largest economy after an end to the era of cheap money. REUTER
By Tom Sims
FRANKFURT (Reuters) – A Munich-based property developer said on Friday it had filed to open insolvency proceedings with a local court, in the latest sign of stress in Germany’s real estate sector.
Euroboden GmbH, with 115 million euros ($126 million) in bonds outstanding and facing possible downgrades in its credit rating, said in a statement that negotiations for property sales had fallen through, hurting its finances.
It also cancelled a meeting with bondholders later this month, where it had hoped to restructure its debt.
“The market outlook for project developers continues to be negative,” Euroboden said, citing high construction costs and interest rates, a slump in demand, and difficulty in getting credit.
Germany has long benefited from an era of cheap money that fuelled a boom in real estate, but now the sector is grappling with a major turn of fortune.
New building permits and construction have plummeted as residential property prices fall and construction job growth stagnates.
Euroboden was founded in 1999 and expanded to Berlin and elsewhere during a decade-long property boom.
Though not large – it made a net profit of 25 million euros and counted 55 employees when it marketed its latest bonds – Euroboden underscores broader sector troubles as the latest in a wave of insolvencies.
Earlier this week, Duesseldorf-based company Development Partner said it had also filed for insolvency, and in July, property developer Centrum Group did so too, citing a “toxic triangle” of cost increases, higher interest rates and stalled investment.
Weakness in real estate has also emerged in the United States and Sweden.
Germany is Europe’s largest economy and the biggest real estate investment market on the continent. The property sector accounts for roughly a fifth of Germany’s economic output and one in ten jobs.
In a July investor presentation, Euroboden said it had hoped to extend its bonds by three years, and it was refocusing on core business in Munich and Berlin after closing an office in Frankfurt.
($1 = 0.9092 euros)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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