Chinese developers in 'survival mode', slash property investment

BEIJING • Chinese developers in "survival mode" sharply cut property investment last month while new construction starts suffered their biggest fall in nearly a decade, suggesting the liquidity-challenged sector is not about to turn the corner any time soon.

China's property market, accounting for about a quarter of the economy, has been trapped in a capital crisis since the summer of 2020, leading some cash-strapped developers to default on their debts and struggle to complete projects.

Wary buyer sentiment has also chilled new investment by developers.

Property investment last month fell 12.3 per cent year on year, the biggest decline this year, while new construction starts by floor area slumped 45.4 per cent, the largest drop since the January to February period in 2013, according to Reuters calculations based on data from the National Bureau of Statistics (NBS) yesterday.

"Everyone, except state-owned enterprises, is in survival mode," said a senior official at a Shenzhen-based developer, speaking on condition of anonymity.

"We're all waiting for a recovery and trying to speed up sales and reduce costs and buy less land. But at the end of the day, sales depend on the end users."

Cash-strapped real estate firms have suffered from tight credit conditions since 2020 after regulators issued tough guidelines on new borrowing by developers, concerned about their spiralling debt.

For developers last month, loans granted by domestic banks dropped 36.8 per cent, while capital raised from abroad plunged 200 per cent, according to Reuters calculations from the NBS data.

Household loans, including mortgages, fell to 121.7 billion yuan (S$24.7 billion) last month from 848.2 billion in June, the central bank said last Friday.

Reflecting the poor buyer sentiment, new home prices fell 0.9 per cent year on year last month, the fastest pace since September 2015, extending a 0.5 per cent decline in June, Reuters calculations based on NBS data showed.

As developers keep to a holding pattern, they are hoping regulators will ease their grip on the sector after a once-in-five-years congress of the ruling Communist Party in autumn, where President Xi Jinping is expected to secure a precedent-setting third term as leader.

"The main supply-side policies have not yet been relaxed, which are likely to be eased after the 20th CPC (Communist Party of China) national congress," said a developer, declining to be named.

In the January to July period, property investment fell 6.4 per cent from a year earlier, the most since March 2020.

New construction starts tumbled 36.1 per cent, extending from a 34.4 per cent drop in the first half.

REUTERS