S&P Global – Developers Credit Outlook, 2024

In the intro to S&P Global's Developers Credit Outlook, it is noted that housing demand remains strong in the US, but mortgage rates have increased, making homes less affordable. However, the low inventory of existing homes has supported homebuilders. In Europe, access to financing is expected to be difficult, as banks are tightening lending conditions, particularly for commercial real estate developers, who may face challenges in refinancing. In Brazil, changes to the housing program are expected to lead to a higher number of housing project launches. In terms of key assumptions for 2024, it is stated that cycle times in the US will be shorter, allowing homebuilders to prioritize returns through higher asset turnover and increased delivery volume. In China, the value of property sales is projected to drop by 5%, with provincial capital cities and lower-tier cities experiencing a decline of 3% and 9% respectively, along with lower prices and a potential volume drop of up to 5%. Latin America and Europe are expected to see improvements in profitability, with margins recovering more evenly in 2024 due to stable inflation and higher-priced projects. However, in Europe, the rate of recovery may be hindered by subdued demand. The key risks identified in the baseline scenario include an increase in US existing home inventories, which could lead to existing homeowners selling their homes and reducing sales for new-home buyers. In Europe, further tightening of monetary conditions could result in fewer mortgages being issued, leading to lower housing purchases and sales for developers. In China, the implementation of policies to support sales in higher-tier cities, such as relaxing home purchase restrictions and mortgage rates, could potentially boost sales.