China’s developers continue to face a liquidity crunch, with fundraising across all channels down 70 percent year over year in January, reported state-run media China News network.
Capital raised by the property industry through selling domestic and international bonds, trust loans, and asset-backed securities totaled 79 billion yuan ($12.4 billion) in January, as uneasy sentiment extended into the new year, according to the report citing data from China Index Academy, a research institute specializing in real estate.
The cash-strapped real estate sector’s funding fell for the 11th straight month in January, underlining investors’ persistent cautions.
In comparison, property companies raised 266 billion yuan ($41.8 billion) in January 2021, and 224 billion yuan ($35.2 billion) in the same period of 2020.
Declining funding adds to the pressures on developers, who face nearly 1 trillion yuan ($157 billion) in repayment obligations this year, according to Beike Research Institute, with more than 100 billion yuan ($15.7 billion) in bond maturities scheduled for March and April, respectively.
In addition, according to data compiled by China Real Estate Information Corp. (CRIC), the top 100 property companies had 39.6 percent lower January sales by value than the same period last year.
Home sales have been falling since the second half of last year as buyer confidence eroded during a liquidity crisis that has rattled throughout the industry following a crackdown on excess borrowing.
The sales slump exacerbated the cash crunch that has made it harder for property giants, including China Evergrande Group, to pay bills.
Evergrande’s sales declined by 95 percent in January, the largest fall among peers. Longfor, Seazen, CIFI, Jinmao, and Vanke saw a 45 to 53 percent drop in sales.
The outlook for the property market isn’t positive, and sales may continue to slow down in the months ahead, CRIC said.
Falling sales, along with heavy near-term maturities, put developers’ solvency at jeopardy since pre-sale funds account for 36.7 percent of China developers’ funding mix, based on 2021 data from the regime’s National Bureau of Statistics.
Recent policy easing, such as mortgage rate cuts and possible easier access to pre-sales financing for developers, may fall short of giving an effective boost to the sector’s liquidity in the near term, reported Bloomberg.
Developers such as Logan, KWG, Greenland, R&F, Agile, and Sunac that drastically reduce their land acquisition in the second half of 2021 risk significantly impairing their project pipelines in 2022. Shimao, Agile, and Sunac’s asset sales may exacerbate their lack of salable resources to sustain sales.
The sales of the top 100 developers closed the year 2021 with a 3.5 percent drop. Like Evergrande and the Hong Kong-listed Shimao Group, many developers have defaulted on debts or faced liquidity pressure.
As of the end of January, 27 of the 64 mainland-listed property companies that had disclosed their 2021 annual earnings projections had warned of net losses.
China’s current real estate market model, which serves as the country’s primary engine of growth, is “unsustainable,” billionaire George Soros stated on Jan. 31 during a virtual event held by the Hoover Institution think tank.
Beijing officials have played down the potential fallout of the housing market turmoil, according to Soros. China’s central bank governor Yi Gang repeatedly stated that the government would limit the economic risks posed by the liquidity crisis at developers such as China Evergrande Group, the world’s most indebted developer.
