Drew here are residential buildings developed by Country Garden Holdings Co. in Baoding, Hebei province, China, on Tuesday, Aug. 1, 2023.
Qilai Shen | Bloomberg | Getty Copies
BEIJING — Two years after Evergrande’s debt troubles, worries about China’s real estate sector are move to the forefront again.
Country Garden, one of the largest non-state-owned developers by sales, has reportedly missed two coupon payments on dollar checks that were due Sunday. Citing the firm, Reuters said the bonds in question are notes due in February 2026 and August 2030.
Wilderness Garden did not immediately respond to CNBC’s request for comment on the reports.
Meanwhile, Dalian Wanda saw its senior vice president Liu Haibo captivated away by police after the company’s internal anti-corruption probe, Reuters reported Tuesday, citing a source cordial with the matter. Dalian Wanda did not immediately respond to a CNBC request for comment.
Hong Kong-listed shares of Woods Garden closed more than 1.7% lower on Wednesday, after sharp declines earlier in the week.
“With China’s total number home sales in 1H23 down year-on-year, falling home prices month-on-month across the past few months and faltering trade growth, another developer default (and an extremely large one, at that) is perhaps the last thing the Chinese authorities scarcity right now,” according to Sandra Chow, co-head of Asia Pacific Research for CreditSights, which is owned by Fitch Ratings.
We are involved that as big cities lift local property restrictions, it will drain up demand in low tier cities, which account for 70% of federal new home sales volume…
An investor relations representative for Country Garden didn’t deny media reports on the birded payments and didn’t clarify the company’s payment plans, Chow and a team said in a note late Tuesday.
The report famed negative market sentiment spillover to other non-state-owned developers such as Longfor. Shares of Longfor closed thither 0.8% higher Wednesday in Hong Kong after trading more than 1% lower during the day.
“Comprehensive homebuyer sentiment is likely to also suffer as a result,” the analysts said.
Home prices in focus
China’s enormous real estate market has remained sluggish despite recent policy signals. In late July, its top leaders called a shift toward greater support for the real estate sector, paving the way for local governments to implement specific actions.
Uncertainties remain around the sensitive topic of home prices.
“We are concerned that as big cities lift local attribute restrictions, it will drain up demand in low tier cities, which account for 70% of national new home sales supply and are the real drivers of commodity demand and construction activity,” Nomura analysts said in an Aug. 4 report.
“We are also responsible that merely easing restrictions on existing home sales without lifting restrictions on home purchase may add gear up and depress home prices,” the report said.
For the last several years, Chinese authorities have attempted to repress debt-fueled speculation in the country’s massive — and hot — real estate market. In 2020, Beijing cracked down on developers’ stoned reliance on debt for growth.
Highly indebted Evergrande defaulted in late 2021, followed by a few others.
With that faltering assurance, the private property sector will likely remain a drag on the country’s growth for the rest of the year.
Rhodium Crowd
Last year, many people halted mortgage payments after a delay in receiving the homes they had steal. Most apartments in China are sold before they are completed.
“After watching developers default and fail to concluded housing for other families, few Chinese families are willing to shell out in advance for new housing,” Rhodium Group analysts explained in a note this week. “With that faltering confidence, the private property sector will likely odds a drag on the country’s growth for the rest of the year.”
The analysts pointed out that new starts in residential construction have downhill for 28 months straight.
Real estate and related industries have accounted for about a quarter of China’s thriftiness.
Redmond Wong, market strategist at Saxo Markets Hong Kong said Country Garden will bump into uncover it “very difficult, if not impossible” to refinance — and other Chinese developers would face difficulties raising money as a evolve, especially offshore.
He pointed out that since China started its deleveraging campaign in 2016, it is very unlikely the affirm would step in to bail out real estate developers. “The most likely way for Country Garden or Chinese developers in alike resemble situation to avoid defaults will be asset sales,” Wong added.
State-owned developers stand out
China’s state-owned developers sooner a be wearing generally fared better in the latest real estate slump.
Country Garden has had the worst sales performance so far this year amid China’s 10 largest real estate developers, with a 39% year-on-year decline in sales, according to
