President Xi Jinping’s determined efforts to resolve China’s housing crisis face mounting challenges as the country’s property sector experiences fresh turmoil. Evergrande, struggling with debt restructuring, China Oceanwide facing liquidation, and Country Garden attempting to avert potential default have cast a shadow over the government’s plans to stabilize the housing market.
China’s housing crisis has taken a precarious turn with the latest developments in the property sector. Evergrande, the embattled property giant, is revisiting its debt restructuring plan. Simultaneously, China Oceanwide is grappling with the specter of liquidation, while Country Garden is battling to prevent a looming default. These unfolding events have left investors perplexed and raised questions about the government’s coordinated approach to stabilize the market.
The turmoil in China’s property sector has taken a toll on the stock market. A gauge of Chinese developer shares, as measured by Bloomberg Intelligence, witnessed a decline of 1.2% following a drop the previous day, which marked the most substantial decline this year. Evergrande’s woes escalated as its shares slid for the second consecutive session, plummeting by as much as 8%. The troubled property developer’s subsidiary, Hengda Real Estate Group, reported missing a bond repayment of 4 billion yuan ($547 million) due by September 25.
Hengda Real Estate Group, a key subsidiary of Evergrande, disclosed its failure to meet principal and interest obligations on the aforementioned bond in a filing with the Shenzhen stock exchange. The company stated its intent to actively engage with bondholders to expedite a resolution while addressing debt-related risks and safeguarding the rights and interests of creditors. Evergrande has been diligently seeking creditors’ approval for its proposed restructuring of offshore debt amounting to $31.7 billion, which encompasses bonds, collateral, and repurchase obligations.
China’s housing market continues to grapple with ongoing challenges. In August, new-home prices in 70 cities, excluding state-subsidized housing, declined by 0.29% compared to the previous month. This decline underscores the need for government intervention to stimulate the market. To this end, policymakers unveiled measures at the end of August, including reduced down-payment requirements and lowered mortgage rates. Despite these efforts, residential sales by value remained near a six-year low, with a modest 2.9% increase in August compared to July. Furthermore, real estate development investment, which contributed significantly to economic output last year, remained stagnant, nearing its lowest point this year.
Li Daokui, a former policymaker at the People’s Bank of China, has emphasized that the housing market’s recovery might take up to a year. He has urged the Beijing government to take additional steps to encourage lending to financially strained developers.
The escalating turmoil in China’s property sector poses a significant challenge to President Xi Jinping’s aspirations of resolving the housing crisis. The government’s coordinated efforts to stabilize the market will be closely watched as they navigate the complex landscape of the property sector.