Chinese real estate stocks got a boost on Tuesday after… Bloomberg– Reports that Beijing has prepared a list of 50 companies eligible for financing.
The list joins a series of measures taken by the Chinese authorities to put the fragile real estate sector on the right track. There are many signs that this sector, which according to UBS accounts for about 22% of China’s GDP, will need more help.
“The decline in used home prices in October was the largest since 2014, at the same time as mortgage receivables fell for the first time in history,” wrote Larry Hu, chief China economist at Macquarie. CNBC In a note on Friday.
This indicates increasing pressures on both the demand and supply sides.
– Increased credit risk
“Actions so far have focused on increasing demand. But the government has not addressed the bigger problem: the credit risks associated with property developers. (…) Without a ‘lender of last resort’, a self-fulfilling crisis of confidence could easily arise, as falling sales and increased risk defaulting on each other. For some large developers, credit risk has increased rapidly recently,” the note also states.
The measures implemented by the Chinese authorities since November last year were aimed at improving developers’ access to financing and lowering interest rates on loans, but Country Garden ended up defaulting on dollar bonds in October – which was reported by Bloomberg. Bloomberg.
-You haven’t reached the bottom yet
On the buyer’s side, according to CNBC last week, Nomura estimated that about 20 million homes across China have been sold but are not yet completed. Apartments are typically sold before completion in China, but the inability of developers to fully build pre-sold units last year forced many buyers to stop servicing loans on homes they had already purchased but not taken over.
Nomura analysts noted in the report that the average price of used homes in China’s 70 largest cities fell 0.6 percent in the September-October period, after falling 0.5 percent in the previous month. The numbers are worrying, as larger cities are expected to have more sustained demand due to improved access to jobs.
“China’s real estate sector has not yet reached the bottom. Markets appear to have been somewhat optimistic about stimulus over the past two months,” the report said.
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