BEIJING • China's struggling real estate developers had another miserable month last month as a slump in home sales deepened.

Contract sales by the country's top 100 developers plunged 38 per cent from a year earlier to 751 billion yuan (S$161 billion), sharper than the 32 per cent drop in the previous month, according to preliminary data compiled by research firm China Real Estate Information Corp (CRIC).

A widening debt crisis at firms such as China Evergrande Group and official efforts to rein in property speculation have crushed home demand and hit the world's second-largest economy, forcing the authorities to ease curbs and soothe home-buyer concerns.

But policies to relax mortgage controls and improve financing for builders have yet to stem the industry slowdown. CRIC sounded a note of caution over the sector, especially debt-laden developers.

"It is difficult to substantially improve the financing environment of those 'problem' real estate enterprises, and the pressure on capital turnover may continue to intensify," it said.

Another month of weak sales will hurt confidence among investors concerned about the longer-term health of property firms as fears emerge of a possible restructuring at Kaisa Group Holdings. Prohibitively high borrowing costs have shut many developers out of the offshore debt market in recent weeks, raising the risk of defaults.

"National sales growth will remain weak for the next six to 12 months," Moody's Investors Service analysts wrote in a note yesterday. "The tight credit environment will increase refinancing risk in the sector, as investors and lenders continue to shy away from financially weak developers."

China's high-yield dollar bonds were set to decline yesterday, falling about 0.5 cent in the morning, said credit traders. A Bloomberg Intelligence index of mainland developers pared its gain to 1.3 per cent as at 11.20am in Shanghai from 1.9 per cent earlier. The gauge has dropped 31 per cent this year.

China's top 100 developers have seen a steady drop in contract sales since July, with more than half of them registering a more than 30 per cent year-on-year decline last month, according to CRIC data. Home sales in China's 29 key cities continued to decline by area last month, down 32 per cent from a year earlier and 19 per cent from the same month in 2019.

Although some cities like Shanghai and Chengdu have accelerated mortgage approvals or trimmed borrowing costs, developers should continue to rely on price discounts or sweeteners for home buyers to drive sales, CRIC said.

Citigroup analysts expect home sales to stabilise as early as next March, after more details of China's plan to levy a property tax emerge, according to a research note yesterday.

BLOOMBERG