Saturday 18 December 2021

China Property Market Faces Torrential Headwinds as Evergrande Collapse Shines Light on Sector’s Problems


China’s property market is imploding and sending signs that China’s GDP is in trouble.

Reuters reported on Wednesday:

China’s property market suffered more headwinds in November, with home prices, sales, investment and construction all falling, weighed by weak demand and a cash crunch among developers.

New home prices fell 0.3% month-on-month in November, the biggest decline since February 2015, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Wednesday. That was worse than the 0.2% drop in October.

Only nine of 70 cities tracked by NBS saw monthly price gains in November, the fewest since February 2015, according to Reuters calculations.

In a separate NBS statement, home sales by value slumped 16.31% in their fifth month of declines, pointing to gloomy demand despite measures taken by some cities to boost transactions.

“Cities of all classes are under pressure,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.

“The current scale of market supply is large and demand is weak. The key is to accelerate inventory de-stocking to stabilise home prices.”

China’s property sector has been grappling with tighter regulations this year, including curbs on bank lending and limits on how much property developers can borrow amid growing financial woes.

Last week, China Evergrande Group (3333.HK) and another major developer Kaisa (1638.HK) missed payment deadlines on their offshore bonds, prompting Fitch to downgrade the companies to “restricted default” status.

We’ve been reporting for months that China’s Evergrande is a symbol of the China property market and economy in general.

China has a mess to contend with while the rest of the world ignores this fact.

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