China’s Property Sales Set To Plunge 30%
China’s property sales are set to plunge this year by more than they did during the 2008 financial crisis, according to new estimates from S&P Global Ratings. National property sales will likely drop by about 30% this year — nearly two times worse than their prior forecast, the ratings agency said, citing a growing number of Chinese homebuyers suspending their mortgage payments. Such a drop would be worse than in 2008 when sales fell by roughly 20%, Esther Liu, director at S&P Global Ratings, said. Since late June, unofficial tallies show a rapid increase in Chinese homebuyers refusing to pay their mortgages across a few hundred uncompleted projects — until developers finish construction on the apartments. Most homes in China are sold before completion, generating an important source of cash flow for developers. The businesses have struggled to obtain financing in the last two years as Beijing cracked down on their high reliance on debt for growth. Now, the mortgage strike is damaging market confidence, delaying a recovery of China’s real estate sector to next year rather than this year, Liu said. As property sales drop, more developers will likely fall into financial distress, she said, warning the drag could even spread to healthier developers “if the situation is not contained.” There’s also the potential for social unrest if homebuyers don’t get the apartments they paid for, Liu said. Although the number of mortgage strikes increased rapidly within a few weeks, analysts generally don’t expect a systemic financial crisis. And while S&P economists estimate about a quarter of China’s GDP is affected directly and indirectly by real estate, only part of that 25% is at a risk level, Liu said, noting the firm doesn’t have specific numbers on the impact of the mortgage strikes on GDP.
Tags : China Property Sales homebuyers Esther Liu Director S&P Global Ratings developers Beijing China real estate sector property sales