Last month, the Chinese regime rolled out more supportive policies to salvage the ailing property market. But latest research data show that the sales performance of the top 100 Chinese real estate companies slumped in the first 11 months.
According to a recent CRIC Research Center report, total sales of the top 100 Chinese housing firms from January to November plunged by more than 40% year-on-year. November’s sales alone dropped by more than 25%.
This year, commercial housing sales may shrink to less than $2 trillion (14 trillion yuan).
As of the end of November, among the large listed real estate companies that publicly disclose annual sales targets, most completed less than 80%, while many achieved below 70%. Some even fell short of their targets by over 20% from a year earlier.
The total area transacted in 30 major cities last month fell 14% from October and tumbled 30% year-on-year.
CRIC believes the sluggish performance last month was due to multiple factors, including the resurgence of the COVID pandemic, weak market confidence, continuous pressure on the economy, low employment rate and income expectation, and falling credit demand.
The research firm noted that state-owned enterprises and high-quality private companies are slowly recovering from credit, bond, and equity financing. But most builders still suffer significant debt repayment issues and must focus on increasing sales to improve their cash-strapped condition. As sales remain weak, real estate firms must wait for consumer demand to improve.
Regarding China’s property crisis, Bloomberg reported that the Chinese regime is facing massive pressure from an outstanding debt of well above $1.6 trillion from public bonds to support troubled builders, including property giant China Evergrande Group.
Earlier this year, the so-called local government financing vehicles (LGFV) have become the primary buyers of unfinished projects of defaulters, which causes analysts to raise red flags.
Zerlina Zeng, a senior credit analyst at CreditSights in Singapore, thinks that the CCP needs enterprises like LGFVs to rescue its economy during the economic slowdown, but “once the policy wind turns, we don’t rule out the possibility of LGFV public bond defaults.”
In addition, David Qu and Chang Shu at Bloomberg Economics calculate total LGFV debt, including bank loans, to reach over $8.5 trillion (60 trillion yuan), the equivalent of 50% of China’s GDP.
Therefore, economists think that LGFVs’ potential defaults would result in significant problems for China’s economy.