With real estate investment sluggish and new construction suffering the worst slowdown in a decade, foreign analysts said cash flows for property developers had dried up significantly.
The crisis is not limited to the deeply troubled property giant China Evergrande.Evergrande is new round of auditNew Auditors Think Old Auditors May Have Cooked The Book, And China’s Leading Mutual Fund Just cherished Evergrande shares are priced at 1 penny per share.
The values of other major Chinese real estate firms, especially those suspected of fraudulent audits like Evergrande, have slashed by up to 70% in the past quarter.
“Everyone is in survival mode, except for state-owned enterprises,” said a senior official at a Chinese real estate company. Reuters on monday.
“We are all waiting for a recovery, trying to accelerate sales, cut costs and buy less land. rice field.
As explained by Reuters, one of the biggest problems facing China’s property market is a significant lack of liquidity. Companies are heavily indebted, investment capital evaporated early in the Wuhan coronavirus pandemic, and underfunded developers developed a nasty habit of abandoning half-finished projects.mortgage rebellionBy refusing to pay collectively.
Customers are wary of buying real estate, investors are nervous about throwing money at real estate companies, and developers lack the cash flow needed to counteract the impression that the industry is collapsing. The credit industry has been stifled by the sudden lack of interest in construction loans for large homes and businesses.
CNBC On Wednesday, a survey by Oxford Economics showed developer cash flow fell 24% year-on-year in July, reversing a constant growth trend that began in 2009.
Tommy Wu, lead economist at Oxford Economics, said: “The crux of the problem is that property developers cannot afford to have enough cash to continue projects due to debt service costs, slowing home sales and misuse of funds. Don’t have flow,” he said.
At its core, Chinese homebuyers are tired of pouring their life savings into new homes that will never be completed. is.
CNBC found in a recent study, quarter of Chinese homebuyers are willing to join a “mortgage rebellion” and stop paying if new home construction is halted. are nervous about the economy and job prospects. None of these concerns are easily resolved by lowering loan rates.
Because pre-sales are common in China’s housing development, and much of a developer’s cash flow comes from advance payments, the mortgage rebellion is drying up the industry’s revenues.
The government has not stepped in to bail out non-state-owned developers, so investors are not comfortable supporting them with new capital injections. When stock prices crash, it becomes difficult for developers to raise funds by selling stock.
Credit is becoming increasingly difficult to obtain as the government is concerned about how much debt the real estate industry is saddled with and has tightened rules to secure more loans. Caixin Global News Chinese regulators are belatedly trying to address the issue, it was reported Thursday. This will create a “pilot program” of loan guarantees to six selected developers, making it easy for them to borrow money to complete their projects.
Deutsche Welle (DW) said Wednesday that China’s tremendous coronavirus lockdown has dampened economic growth and spread anxiety among both consumers and businesses, pushing people into the biggest and longest investment most people make: a new home. accused of drastically reducing demand for
“China practically does not live together [Chinese coronavirus] just like the rest of the world. So if the virus suddenly hits the country, there will be economic chaos. They have refused to import mRNA vaccines, so their immunity is not built.
Another analyst, Pantheon Macroeconomics’ Craig Botham, sees the “real estate crash” as a bigger problem than the coronavirus lockdowns, or perhaps the most lingering hangover from them.
“While the economy has shown it can recover quickly from lockdowns, the damage from falling asset prices in sectors representing 30% of GDP is much more damaging. It’s hurting,” Botham said.
After dictator Xi Jinping secured a third term at the Communist Party Congress reportedly held in November, Chinese investors and foreign analysts say the government is loosening its purse strings and the private sector is I was skeptical that the government would introduce an economic stimulus package into the economy.