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(Bloomberg) — Country Garden Holdings Co.’s Chair Yang Huiyan says she is “very confident” the company can repair its balance sheet and pledged the founding family’s support for the ailing Chinese property giant.

The path to fix the balance sheet is “very clear and can be achieved,” Yang said at a monthly management meeting held Friday, according to a statement on the developer’s WeChat account. Country Garden “will strive to become a model for the quick recovery” of distressed companies, she added.

Country Garden’s debt struggles have epitomized the property crisis engulfing the country’s economy. The remarks come as China introduces new measures to put a floor under a property market that’s been roiled since the introduction of measures three years ago aimed at cutting the industry’s reliance on debt.

The developer, a poster child of China’s property crisis, defaulted in October for the first time on dollar bonds, and will face a test next week to avoid the same fate on a local note — an outcome that a regulator signaled it’s trying to avoid.

Yang said that Country Garden can maintain “positive assets” for the next ten years “as long as our inventory assets are sold normally.”

Separately, the company said in the statement that it will have three tasks over the next 12 months: ensuring delivery, operation, and credit and it expects to deliver more than 400,000 units in 2024.

Source : BNNBloomberg

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(Yicai) Dec. 6 — A number of cash-rich Chinese distillers and coal miners have started to buy up land and properties in the country amid a sluggish real estate market.

An affiliate of liquor maker Jingpai paid CNY3.5 billion (USD490 million) for a sought-after land plot in Suzhou, eastern Jiangsu province, in October at a premium rate of 15 percent. The company has bought up a lot of property in Nanjing and Suzhou this year and is cooperating with real estate developers to let it operate them.

And coal miner Inner Mongolia Manshi Coal Group splashed out CNY4.1 billion (USD575.8 million) on three luxury apartment buildings in Shanghai. Two other coal producers, Erdos Group and Huineng Group, also recently spent CNY2.6 billion and CNY6.2 billion, respectively, on property in Shanghai.

Now is the time to pick up bargains as the real estate market is still stagnant and there are stimulus policies that should soon take effect, Zhang Hongwei, founder of Jingjian Consulting, told Yicai. Companies with deep pockets can buy up properties with a long-term view. They should look for prime properties in good locations that have a low price, he added.

Whether it is time to bargain hunt or not depends on the situation and it is still necessary to pay attention to market and policy risks when getting involved in real estate because of the volatile nature of the market, said Bai Wenxi, chief economist of IPG China.

Real estate is a capital-intensive industry with a lack of liquidity so investors need to carefully weigh up the pros and cons before they make a decision, he said.

Source : YiCaiGlobal

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At some point next year, the issue of home delivery could turn into a social issue and endanger social stability, and Beijing may eventually need to significantly ramp up policy support.

Nomura

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Chinese authorities are putting pressure on state banks to accelerate lending to private property developers, as they strengthen efforts to revive the country’s debt-stricken real estate market by supporting some of its biggest and most precarious companies.

Chinese regulators have instructed state banks to ensure the amount of loans to private property developers at least match the sector-wide average, according to two people who attended a gathering in Beijing on Friday of senior government and banking officials.

Shares of private developers jumped on Tuesday. The companies, which lack the support of their state-backed rivals, have been at the heart of a crisis in China’s property sector, which previously accounted for more than a quarter of economic activity in the country.

A barrage of defaults at private developers, led by Evergrande, the world’s most indebted property company, in 2021, has shaken confidence in China’s economy, leaving creditors to chase unpaid debts and real estate projects to sit unfinished across the country.

The unfolding funding crisis has pushed Country Garden, once China’s biggest private developer by sales and long thought of as more financially stable than its peers, into bond default this year.

“These new measures reflect concerns of policymakers on the credit risk of private developers,” said Larry Hu, chief China economist at Macquarie. “It would boost the short-term market sentiment for sure,” he added, while cautioning that “what commercial banks can do is limited”, pointing to the lack of success of previous support packages.

At the meeting on Friday, regulators also told state lenders to issue mortgages to home buyers purchasing property from private developers at least at the same pace as they issue mortgages to buyers from all developers.

The latest moves, conveyed to banks in person by representatives from the People’s Bank of China, the Central Financial Commission, the National Administration of Financial Regulation and the China Securities Regulatory Commission, illustrated authorities’ urgent concern about arresting the downward spiral in the property sector.

Regulators also pledged on Friday to consider unwinding some restrictions, such as caps on bank loans for mergers of developers.

Previous piecemeal support measures have failed to reverse the slowdown. A flagship $27bn PBoC bailout scheme has disbursed only about 3 per cent of its funds after state lenders could not find creditworthy developers.

At the Friday gathering, China’s biggest banks, brokerages and distressed asset managers were directed to meet property developers’ funding needs to a “reasonable” degree, according to an official readout.

The People’s Bank of China, NAFR and CSRC did not immediately respond to requests for comment.

Shares in Chinese property developers gained on Tuesday, with the Hang Seng Mainland Properties index, which tracks Hong Kong-listed Chinese developers, rising 2.9 per cent, well ahead of a 0.6 per cent increase for the broader Hang Seng benchmark.

Shares in developer Sunac China leapt 19 per cent after disclosing on Tuesday that it had begun implementing a $10bn debt restructuring. Country Garden climbed 7.8 per cent and Longfor Group rose 5.8 per cent, while China Vanke and China Overseas Land added 5 per cent and 3 per cent, respectively.

“A key thing to watch is whether and when policymakers will take bolder action, such as creating a lender or buyer of last resort for property developers,” Hu said. “If it happens, this will be the turning point for the property market.”

Source : FinancialTimes

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Markets ‘too optimistic’?

More high-level signals

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SINGAPORE — Singapore asset manager Keppel is looking deeper into emerging markets like India to drive investments even as China, long a source of business, struggles with a property crisis that threatens to dampen growth for the country.

Keppel, which counts Singapore state investor Temasek as a major shareholder, will send a management team to India in November to “examine the market more closely” in order to establish a foothold.

Louis Lim, chief executive officer for Keppel’s real estate division, told Nikkei Asia in an interview that this is being done as the company aims to balance its portfolio across the region, with India “looking attractive.”

“This is a good time for India,” he said. “There’s a lot of impetus for growth across sectors, not just real estate. … We see opportunities there to grow our infrastructure and our connectivity businesses.”

In Mumbai, Keppel and Indian real estate developer Rustomjee Group in May jointly launched high-rise apartments in a project named Lavie. The condos form part of the Uptown Urbania integrated township in the city’s Thane West.

Uptown Urbania sprawls over 100 acres (40 hectares), with the Lavie project spread over 8.5 acres with eight high-rise towers. It offers amenities for residents such as a swimming pool, gymnasium, business center, yoga deck and whirlpool baths.

In China, Keppel in early October announced an agreement to divest a 35% equity stake in Chengdu Taixin Real Estate Development. This joint venture between Keppel and mainland real estate developer Vanke Enterprise owns V City, a 16.7-hectare residential project in Chengdu.

Vanke is paying out about 94 million Singapore dollars ($69 million) for Keppel’s divested stake. Keppel said the V City development was completed in 2020, and all 5,399 residential units and 356 street-front shops have been fully sold.

“In the case of the more recent Chengdu divestment, that is an amount of money that we can deploy because actually the project is almost completed,” Lim said. “In terms of the value that we’ve been able to capture, the profits have already been banked and we felt it was time to take those monies and deploy them elsewhere.”

In China, Lim noted that the property sector has been through a rout and assessed that it is unlikely that the real estate space will experience a fast recovery.

The world’s second-largest economy, after the U.S., has of late been pressured by troubles from beleaguered property developers.

For instance, China Evergrande Group, once the largest developer in the country, is struggling under heavy debts accumulated over a number of years, and a sales slump has hit its cash position following a government crackdown on the sector.

In August, Evergrande filed for bankruptcy protection in America. At the same time, Country Garden Holdings, the mainland’s largest property developer by revenue, experienced a worrying cash crunch.

The World Bank in October cut its growth forecast for China into next year as Asia’s largest economy struggles with the brewing property crisis, which has spelled bad news for its gross domestic product.

Growth is now pegged at 4.4% for 2024, down from the 4.8% figure the institution forecast in April. Oxford Economics, in an August report, noted that property-related debt accounts for at least 43% of China’s GDP by estimates.

Keppel’s Lim noted that industry watchers do not believe China will see a turnaround from its property troubles next year, with his company “hunkered down” to focus on spaces that are a priority.

“We do have a residential program for China that we will continue to invest in,” he said. “We work with the local partners to buy into attractive micro-market real estate opportunities in residential.”

Keppel has a China Urban Development Investment Programme that backs residential developments in Chinese gateway cities alongside co-investors. In 2022, through this program, Keppel invested in a residential site in Shanghai with another partner.

Lim said that Keppel has been in the Chinese market for over 30 years, and it will continue to be an important place for his company in the future, even though the real estate sector is currently laden with uncertainty.

Apart from this, the company is also eyeing opportunities in ASEAN members, including countries like Vietnam, Indonesia and Malaysia.

Diving into sustainable developments is a key aspect of Keppel’s approach, Lim highlighted, and this has been seen in a few projects that the company has within its portfolio.

International Financial Centre, located in Jakarta’s central business district, is a Keppel-developed project that comprises office space and retail outlets. The development uses energy-efficient technologies and has management systems to minimize power consumption.

Over in Vietnam, the company has a stake in Saigon Centre, a mixed-used development located along Le Loi Boulevard in Ho Chi Minh City’s central business district. The project uses energy generated from solar panels to reduce carbon emissions.

“We have demonstrated that sustainability produces financial results,” Lim said. “You may be paying more in rent, but you may be paying less in energy … [if] we are able to provide technology to help your office space run more efficiently.”

Source : NikkeiAsia

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THE Bank of England warned that house prices are likely to fall further in many economies and flagged significant downside risks in the Chinese property market.

A further deterioration in activity and prices could pose risks to the Chinese economy and financial sector, which could spill over into the UK and other jurisdictions. The central bank disclosed this in a record of its Financial Policy Committee (FPC) meetings held in late September and early October, which was released on Tuesday (Oct 10).

The FPC will continue to monitor closely developments in Chinese and Hong Kong property markets ”and the potential for spillovers to UK financial stability,” the committee said.

The panel also noted that UK household finances remain under pressure after successive BOE interest-rate increases since 2021 to tame inflation.

The share of households with high debt-servicing ratios is expected to keep rising next year. Yet this level will likely stay below the historic peak reached during the global financial crisis in 2007, the committee predicted.

In the UK, the proportion of new mortgage lending for 35 years or more has increased by 8 percentage points to 12% between the first quarter of 2021 and the second quarter of 2023. For private renters in Britain, rents rose by 5.5% in the year to August.

New floor space sold in China each month has fallen by nearly a half from the levels seen in January to June in 2021, and real estate investment has dropped by nearly a fifth in August year-on-year. BLOOMBERG

Source : Bloomberg

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Many Chinese invest as much as 70% of their savings in real estate, a sensibility that has benefited Thailand’s luxury condo and apartment sector for several years.

Kashif Ansari, co-founder and CEO of Juwai IQI Group, a real estate marketing firm that helps connect Chinese buyers to properties in Southeast Asia from Kuala Lumpur and other offices, told VOA’s Korean Service that the trend is now leveling off.

“This year, Thailand is no longer the number one destination for Chinese buyers like it was in earlier years,” Ansari said via email. “Instead, it is fifth, and the top four destinations are all the traditional English-speaking countries with prestigious educational sectors.”

Thailand was the top location for Chinese to invest in residential properties from 2018 to 2021, according to the firm’s list of the 10 countries most desired by Chinese buyers. By 2022, Thailand was fourth, and now, in the first half of 2023, it’s fifth.

Thailand’s Real Estate Information Center also found Chinese buyers have been the largest cohort of foreigners buying condominium units in Thailand since 2018, purchasing 3,562 units worth more than $511 million in the first nine months of 2022.

The four most popular countries among Chinese buyers in the first half of 2023 were Australia, Canada, the U.K. and the U.S., according to Juwai IQI.

Ansari said Chinese are buying homes in Australia to move and live there permanently. Chinese purchasing residential properties in Thailand are mostly investors.

“Most Chinese buyers [in Australia] this year have been purchasing for their own use and are on the path to becoming new Australian citizens,” Ansari said. “Many of the buyers that we work with are either students studying in the destination country or are planning on moving to the country and purchasing a home to live in.”

Neighboring Vietnam ranked ninth in Ansari’s survey and, according to real estate agents, is less reliant on Chinese investors than Thailand.

Nguyen Thanh Nga, chairman of Ho Chi Minh City-based Global Green Real Estate property developer, told VOA’s Vietnamese Service that “Chinese investors are mainly interested in apartments in big cities like Hanoi and Ho Chi Minh.”

He said the crash in the Chinese property market has not affected Vietnam and that investment from Chinese investors there remains steady.

Su Ngoc Khuong, senior director of investment at Ho Chi Minh City-based real estate firm Savills Vietnam, told VOA’s Vietnamese Service that Vietnam does not heavily rely on Chinese buyers, adding the foreign buyers using his firm are from the U.S., Europe, Japan, South Korea, Hong Kong and Singapore.

China’s economic uncertainties

According to a study by Shanghai Jiaotong University’s Shanghai Advanced Institute of Finance and financial firm Charles Schwab, overall financial confidence among China’s growing numbers of affluent citizens fell slightly this year, leading them to hold back on high-end purchases.

China’s interwoven economic problems such as a youth unemployment rate so high Beijing stopped releasing the rate as of August, exports dropping 8.8% in August, shrinking household consumption fueling deflation, and a massive real estate crisis have led to speculation that the next step in its decades-long red-hot economic growth may be stagnation.

These financial difficulties at home mean Chinese buyers are hesitating with Thai investments.

Deals now take months

Xin Qui is a founder of Taiheju, a property agency in Thailand that mostly deals with Chinese customers intent on renting or investing in properties in the country.

“During the peak in 2018, it only took us a few weeks to close a deal, or within one week if a client came and saw the property,” she told VOA’s Thai Service in a telephone interview. “Now it takes a few months.”

Prashanth Parameswaran, a fellow at the Wilson Center and founder of the weekly ASEAN Wonk newsletter, told VOA’s Korean Service, “We are seeing a recalibration of post-pandemic economic realities, and that includes the current slowdown of China’s economy.”

“Whether or not this continues in the long run will depend on the actions of other Chinese investors moving forward and what Southeast Asian states can do to manage this fallout both with Beijing as well as with other potential investment sources,” he said.

Source : VOANews

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