Chinese developers’ cash flow plunged more than 20%

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Analysts It In the current real estate slump, it is common to expect public entities to outperform other developers. Pictured Yesterday Guangxi, ChinaMore information can be found as of August 15, 2022 is a real estate development that was created by a state-owned conglomerate Poly Group.

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BEIJING — Cash flow for Chinese property developers — a sign of companies’ ability to stay afloat — has shrunk this year after steady growth over the past decade, according to Oxford Economics.

Developer cash flow through July according to They’re down 24% annually according to the company’s core economics analysis. Tommy Wu.

These are data Results showed growth slowed markedly almost every year after 2009 Total Finance July annualized figure was 15.22 trillion yuan ($2.27 trillion) from 20.11 trillion yuan. yuan in 2021.

Credit In the wake of a drop in demand for credit, demand falls China Expectations missed in JulyProperty developers continue to struggle

About two years ago, Beijing’s government took steps to reduce developers’ reliance on growth-linked debt. Notably, Evergrande defaulted Ende last year Other developers like Shimao Plus You Defaulted Despite They seem more balanced despite better balance sheets.

As investors become more cautious, Chinese property developers risk losing an important source of cash flow: prepayments from homebuyers.

Houses are usually sold before completion. China. But since late June, some homebuyers have been protesting the delay in building apartments, which has halted mortgage payments.

“The crux of the problem is that property developers have insufficient cash flow – whether due to debt service charges, weak home sales or misuse of funds – to continue projects,” said Wu According to a report released last Wednesday.

“Resolving this issue will restore homebuyers’ confidence in developers, which will help support home sales and, in turn, improve the financial health of developers.”

More than $2 billion in high-yield developer debt is due in September, more than twice that of AugustUse the following link to get startedAccording to Morgan Stanley analysis as of August 10.

According to the US investment bank, 25% of buyers bought their property before completion and were likely to cancel their mortgage payment if construction was interrupted. August 15 report, citing AlphaWise proprietary Consumer Survey.

Not only real estate accounts are suitable for this purpose. Much of household wealth comes from China, but analysts estimate that real estate and other property-related industries account for more than a quarter. GDP of China. This real estate slump is responsible for the slowdown in economic activity this year.

In an effort to promote growth, the People’s Bank of China cut rates on Monday for an unexpected 10% cut on medium-term loans, which is a one-year rate that institutions can use.

While the PBOC might be hoping the cut will ease the financial burden on some homebuyers and allow developers to get loans. However, funding is not the only problem. Bruce PangChief Economist and Head of Research Greater China JLL.

It was pointed out that developers had difficulty obtaining financing and were helped by homebuyers. But due to him, people are more cautious when buying new homes because they expect future jobs and returns on investments.

Although several reports indicate that the government plans to continue funding developers, the central government has yet to announce broader support for real estate. The minutes of last month’s high-level meeting were read. Local governments are responsible for delivering completed houses.

The top three sources of developer funding, down payments and deposits, all fell 34% in this year’s report. Wu’s analysis.

Based on annualized data, funding from other sources decreased by 22% while self-raised capital (including bonds and stocks) decreased by 17%.

Investors are turning to Chinese ownership

Investment Most of the funds are not used. Chinese real estate developers have the opportunity to reduce their sources of financing.

“Worrying is the lack of will and speed among key policy makers to address developer funding issues,” Carol Lye, deputy portfolio manager at Brandywine GlobalCNBC, replied via email.

Lye According to The attribution to an investment management company is to China The price of real estate is extremely low. Brandywine holds “high quality real estate bonds which have been favored in terms of government support”.

Some investors They have turned to other companies for investment opportunities. Asia.

“We have liquidated almost all of our holdings in the Chinese residential sector. It’s more of a wait-and-see game in terms of returning exposure,” Xin Yan Low, Singapore-based portfolio manager for Asia At Real estate equities Janus Henderson. They refused to give a time frame.

“There are still plenty of alternatives in the region, especially with reopening now, Singapore, Australia, basically back to full reopening, the fundamentals are strong,” she said.

Top holdings in its co-managed Horizon Asia-Pacific Property Income Fund include Japan Metropolitan Fund Invest, Mapletree Logistics Trust and Hang Lung Properties.

Patrick Ge In of Morningstar According to a report, this month’s publication said that some funds were taken from China’s transfer property transfer from one place to another.

Overall, according to the report, the money was invested in China Property In six months, the funds fell by 59%

But according to BlackRock contributed to this report. Investments One of the companies that bought the report was a member of this group. Chinese real estate bonds – including Shimao’s.

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