Revenues of Chinese real estate developers hit record lows
China is experiencing a serious crisis in the real estate market, and now the authorities are taking various steps to stabilize the situation. However, so far these steps have not brought tangible results, and the income of developers decreased by 87%.
According to statistics, during the current period, the total profits of 136 developers operating in China and Hong Kong amounted to about $3.6 billion, which is the worst result since 2008.
China’s largest real estate developer, Country Garden, reported a 96% drop in profits. At the same time, the developer notes that the crisis in the market has not yet subsided, and it is too early to talk about recovery. Not all companies have survived the difficulties, and for the current year, their number has decreased by 27%. In addition, a record number of defaults on corporate bonds were recorded.
Analysts point out that it is still difficult to talk about the scale of the crisis. The fact is that many developers have frozen some projects due to a lack of funds for their completion. And it is still difficult to calculate how many of these objects are and what the losses are. Now the worst thing is for private companies, which, unlike the state, have no financial support from the government. So they have to rely on their own resources. Many developers have frozen projects for an indefinite period, there are some who have simply stopped the work and will not continue. The situation in the housing sector is becoming more and more serious, as citizens refuse to pay the mortgage until the construction of houses will not be completed. They are coming out in mass protests.
The Chinese government is taking a number of measures, but experts note that there is no unambiguous solution to improve the situation. In 2020, the authorities have already tried to regulate the processes, but their innovations gave the opposite result. Then the government defined the norms that assessed the degree of the debt burden of developers. This has led to the fact that a number of large companies have declared default, and many firms were also on the verge of bankruptcy.
Last summer, a program was introduced to narrow the gap between the poor and the rich. As a result, many sectors of the economy suffered, especially the technology sector. This situation immediately affected the stock market, there was a recession, which caused even greater damage to the real estate segment.
The Chinese are in no hurry to invest, they prefer to wait out the hard times by putting money on deposit, rather than investing in real estate. Such trends have led to an increase in deposits in the country by 7%, the total amount of more than 16 trillion dollars. Against this backdrop, home sales fell by nearly 40%.