© Reuters. File photo: Cranes are seen inside a house under construction in Shanghai, China, on July 20, 2022. REUTERS/Aly Song
BEIJING (Reuters) – Chinese developers in “survival mode” slashed property investments in July while new construction starts suffered the biggest drop in almost a decade.
China’s property market, which accounts for about a quarter of the economy, has been in a capital crisis since the summer of 2020, with some cash-strapped developers defaulting on their debts and struggling to complete projects. Cautious buyer sentiment is also cooling new investments by developers.
Real estate investment fell 12.3% year-on-year in July, the biggest decline in 2022, and new construction starts by floor area fell 45.4% in 2013, according to Reuters calculations based on data from national bureaus. It was the biggest drop since January-February. of Monday Statistics (NBS).
“Everyone is in survival mode, except for state-owned enterprises,” said a senior official at the Shenzhen-based development company, who requested anonymity.
“We are all waiting for a recovery and trying to sell faster, cut costs and buy less land. But at the end of the day, sales are dependent on the end user.”
Cash-strapped real estate firms are struggling with tight credit conditions after regulators issued strict guidelines on new borrowing by developers after 2020, fearing a surge in debt.
“We need to tighten our belts and our number one priority is to make sure the housing project goes through,” a source at a former defaulted developer told Reuters.
“It’s really hard to raise money when trust is eroded,” he said on condition of anonymity.
Domestic bank lending to developers fell 36.8% in July, while foreign funding fell 200%, according to Reuters calculations from NBS data.
Household loans, including mortgages, fell to 121.7 billion yuan ($18 billion) in July from 848.2 billion yuan in June, the central bank said on Friday.
Reflecting deteriorating buyer sentiment, new home prices fell 0.9% in July, the fastest pace since September 2015, and fell 0.5% in June, according to Reuters calculations based on NBS data. .
Developers maintain a pattern of holding out, as regulators push into the sector after the ruling Communist Party Congress in the fall, when President Xi Jinping is expected to secure an unprecedented one-third. want to ease the dominance of leader tenure.
“Key supply-side policies have not been eased yet and are likely to be eased after the 20th National Congress of the Communist Party of China,” said the developer, who declined to be named.
Property investment from January to July fell 6.4% year-on-year, the biggest since March 2020.
New construction starts fell 36.1% from a 34.4% decline in the first half.
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