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China property
Business

Nowhere to hide for Chinese developers as slump deepens amid cash crunch, debt defaults despite easing measures

  • Home sales fell 25.6 per cent last quarter as concerns about credit squeeze, debt defaults sidelined buyers
  • Local authorities in more than 60 municipalities have taken steps to unshackle the market from rules hobbling the industry

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An aerial view shows the Evergrande Changqing community iin Wuhan, Hubei Province in September 2021. Photo: Getty Images
Lam Ka-sing
A slump in China’s property market deepened after key industry indicators weakened last quarter, as piecemeal efforts by local governments proved to be too little too late to overturn bearish sentiment among developers and consumers.
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Property sales sank 22.7 per cent to 2.96 trillion yuan (US$465.4 billion) from a year earlier, the National Bureau of Statistics said on Monday, compared with an 88.5 per cent gain in the same period last year. The latest setback was mainly due to a 25.6 per cent slide in the residential market, it added.

“The sales data in various places in March was really bad, with many cities generally showing declines exceeding 40 per cent,” said Yan Yuejin, research director at Shanghai-based E-house China Research and Development Institute. “This also shows that the easing policy since the fourth quarter of last year has not fully produced the desired impact.”

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More than 60 municipal authorities have lifted market restrictions in the first quarter in bids to revive sales, according to a note published by the China Index Academy, a market research firm. Yet, persistent reports of developers – from China Evergrande to Kaisa Group and Sunac China – struggling to repay debt have kept homebuyers at bay while Covid-19 lockdowns threatened household finances.

Yan expects further as much as a 10 per cent pullback in home sales in the current quarter. There are chances the market could improve by year-end because of the low-base effect from a “very poor” sales in the second-half of last year, he added.

In the latest statistics bureau report, the government said the total area of ​​private housing sold shrank 13.8 per cent last quarter from a year earlier. The average price plunged 10.3 per cent to 9,252 yuan per square metre, based on Yan’s calculations.

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The underlying cash crunch triggered by China’s “three red lines” policy and weak market outlook are also making developers more cautious about preserving their cash resources.

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