From Reuters:
An oversupply of residential property and a market slowdown have left Chinese developers with their worst cash crunch in more than two years, revealing the extent of China’s real estate downturn and paving the way for further consolidation in the sector.
A Reuters study of more than 80 China-listed developers that have declared March quarterly earnings showed cash to short-term-debt ratios at two-year lows amid a steady decline in margins since 2011.
That was the year the government moved to rein in the overheating housing market through measures including higher mortgage rates and limits on how many homes each family can buy.
But the government crackdown is only part of the story. A downturn in property prices, pressure to pay for last year’s record land purchases, and a tighter credit market have combined to put severe strains on developers’ liquidity.
The mounting pressure could lead to sales of assets such as land banks and completed projects as the government presses for consolidation in the highly fragmented sector, analysts and investors said.
Even without further government curbs this year, developers’ financials will feel the pinch of subdued house prices, which fell for the first time in two years in May.
“The situation is quite severe now. Mid-sized developers are facing pressure as interest rates for trust loans are high, the impact will emerge eventually. The size of developers affected are getting larger,” Hong Kong-based property agent Midland Realty COO Samuel Wong said.
“H2 will be worse than H1 when problems surface, unless there is more easing in policy or liquidity.”
Correct, and as if in response, Liu Shiyu, PBOC deputy governor, is out today saying that China’s economy is in ‘reasonable range’ and it will keep prudent monetary policy as well as prevent systemic financial risks.
Smash housing stimulus, remember?
