A Hong Kong court last week heard four cases against Chinese property developers that had been ordered bankrupt by creditors, the highest number of cases ever brought before the court at the same time.
The surge in liquidations means more trouble for China’s property market, which has been on the brink of collapse for years.
The four developers summoned to court last week were Kaisa Group Holdings, Shimao Group Holdings, Redsun Properties and DaFa Properties.
All four companies were granted a temporary stay on liquidation, but the court only extended it for a maximum of seven weeks. Kaisa Holdings was bluntly told it had “no excuse” for a further extension. Court observers noted that each extension only worsened the restructuring terms.
of South China Morning Post (South Carolina State University Press) I got it. On Monday it was reported that several other Chinese property developers are also awaiting their own hearings or have already been ordered to sell assets to repay creditors, including at least one state-owned company.
Glenn Ho, an expert at international audit and consulting firm Deloitte, predicts that “we will see a second wave of restructuring after 2025” as “there has been no significant improvement in home sales or homebuyer confidence.”
The one glimmer of hope for China’s real estate industry is that many of these liquidation requests from creditors are probably strategic. In other words, creditors are not actually forcing developers to sell assets and dissolve. The liquidation cases are an effort to pressure developers to get more serious about paying their arrears.
Unfortunately, this tactic may not work: Creditors are in desperate need of cash as the global economy falters, but Chinese property developers are even more desperate as asset values plummet and Chinese consumer confidence approaches record lows.
of The Wall Street Journal (The Wall Street Journal) Observed It was reported in June that China’s housing market appears to be failing to respond to the government’s massive stimulus package enacted this year, with investors and individual home buyers “remaining cautious” and home prices still falling.
Despite the Communist central government injecting $138 billion in “ultra-long-term government bonds” and $41 billion in “refinancing program” funds, retail home sales showed only “modest” growth.
The latter program was designed to help state enterprises buy up distressed properties so that Chinese consumers would see all the cobwebby “For Sale” signs disappear and decide that real estate investments were safe again. The $41 billion in re-lending funds proved completely insufficient to reinvigorate consumer confidence in homebuying.
“Despite Beijing rolling out its most aggressive stimulus package to date in mid-May in the hope of restoring confidence, the market appears yet to have found a bottom,” he said. The Wall Street Journal He made the remarks, pointing out that April figures from the National Bureau of Statistics of China were disappointing.
of Financial Times (FT) Warned “China’s housing market is not over yet,” he warned last week, with home sales still at about half their peak three years ago, new housing starts at only one-third of their peak and property as a share of gross domestic product at its lowest in 15 years.
of FT The article rejected one common explanation for China’s housing slump – that the central government made it too difficult for investors to buy property in an attempt to eradicate market speculation – and said that while “commonly cited reasons” such as the impact of the pandemic and weak consumer confidence are “plausible”, the more “fundamental” problem is stagnating urbanization.
The real estate market boomed during the economic boom, when Chinese workers flocked to big cities, seeking bigger apartments. Urban populations are still growing, but at less than half the rate they were at their turn-of-the-century peak. Expensive construction projects have stalled with buildings only half-completed. Unleash The 2022 “mortgage rebellion” saw angry consumers rage while property developers struggled to sell existing inventory at discounted prices.
As FT As has been pointed out, many market observers are skeptical that China can synchronize housing supply and demand without using large subsidies, which it does not actually have. picked up The economy appears to have started to recover in June, but it looks more like a easing of the recession than a robust recovery, and the wave of bankruptcy cases flooding Hong Kong’s courts suggests creditors are not willing to wait much longer for a robust recovery.
