Cash-strapped real estate firms have suffered from tight credit conditions since 2020 after regulators issued tough guidelines on new borrowing by developers
Chinese developers in ‘survival mode’ sharply cut property investment in July while new construction starts suffered their biggest fall in nearly a decade, suggesting the liquidity-challenged sector is not about to turn the corner anytime soon.
China’s property market, accounting for about a quarter of the economy, has been trapped in a capital crisis since the summer of 2020, leading some cash-strapped developers to default on their debts and struggle to complete projects. Wary buyer sentiment has also chilled new investment by developers.
Property investment in July fell 12.3% year-on-year, the biggest decline in 2022, while new construction starts by floor area slumped 45.4%, the largest drop since January-February 2013, according to Reuters figures based on data from the National Bureau of Statistics (NBS) on Monday.
Everyone except state-owned enterprises is in survival mode, said a senior official at a Shenzhen-based developer, speaking on condition of anonymity.
We’re all waiting for a recovery and trying to speed up sales and reduce costs and buy less land. But at the end of the day, sales depend on the end users, the official said.
Cash-strapped real estate firms have suffered from tight credit conditions since 2020 after regulators issued tough guidelines on new borrowing by developers, concerned about their spiralling debt.
We’ll just have to tighten our belts, and our top priority is to make sure housing projects are delivered, an official at a developer that once defaulted on bonds told Reuters.
It’s really hard to raise funds once your credibility is damaged, said the official, speaking on condition of anonymity.
For developers in July, loans granted by domestic banks dropped 36.8%, while capital raised from abroad plunged 200%, according to Reuters figures from the NBS data.