Chinese developers in ‘survival mode’ cut real estate investment

BEIJING (Reuters) – Chinese developers in “survival mode” slashed real estate investment sharply in July while new-build housing starts suffered their biggest drop in nearly a decade, suggesting the sector in Liquidity trouble isn’t about to turn the page anytime soon.

China’s property market, which accounts for about a quarter of the economy, has been trapped in a capital crunch since the summer of 2020, leading some cash-strapped developers to default on debt and struggle to carry out their projects. Buyer mistrust has also dampened new developer investment.

Real estate investment in July fell 12.3% year-on-year, the biggest drop in 2022, while new construction starts by floor area fell 45.4%, the biggest drop since January-February 2013, according to Reuters calculations based on data from the National Bureau of Statistics (NBS) on Monday.

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

“We are all waiting for a recovery and trying to accelerate sales, reduce costs and buy less land. But ultimately sales depend on end users.”

Cash-strapped property companies have been suffering from tight credit conditions since 2020 after regulators issued tough guidelines on new borrowing by developers, concerned about soaring debt.

For developers in July, loans from domestic banks fell 36.8%, while capital raised overseas plunged 200%, according to Reuters calculations of BNS data.

Loans to households, including mortgages, fell to 121.7 billion yuan ($18.00 billion) in July from 848.2 billion in June, the central bank said on Friday.

Reflecting poor buyer sentiment, new home prices fell 0.9% year on year in July, the fastest pace since September 2015, and extending a 0.5% decline in June, according to calculations by Reuters based on NBS data.

As developers stick to a wait-and-see pattern, they hope regulators will loosen their grip on the sector after a once-every-five-year ruling Communist Party congress in the fall, where President Xi Jinping is expected to get an unprecedented third. leadership mandate.

“The major supply-side policies have not yet been relaxed, which is expected to be relaxed after the 20th CPC National Congress,” said a promoter, speaking on condition of anonymity.

In January-July, real estate investment fell 6.4% from a year earlier, the highest since March 2020.

New construction starts fell 36.1%, after falling 34.4% in the first half.

($1 = 6.7595 Chinese Yuan)

(Reporting by Liangping Gao, Ryan Woo, Kevin Yao and Clare Jim; Editing by Jacqueline Wong)

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