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China real estate developers post sales drop last month

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Villas of real estate property "Viva Villa" developed by Ping An Real Estate under construction in Xishuangbanna Dai autonomous prefecture, Yunnan province on June 20, 2019. CHINA DAILY/ANN

China real estate developers post sales drop last month

Most real estate companies in China witnessed drops in sales last month due to the outbreak of the 2019 Novel Coronavirus, which may cast a shadow on their performance this month and next month, a report from 21st Century Business Herald said.

Evergrande Group registered a contracted sales area of 4.49 million square metres last month, growing 16 per cent from the previous year, while sales fell 6.07 per cent to 40.55 billion yuan ($5.8 billion).

The performance of Country Garden also declined slightly by 0.44 per cent year-on-year, to 32.92 billion yuan in contract sales.

Sunac China posted a 14.7 per cent plunge in contracted sales area and a 22.2 per cent decline in sales revenue compared with the same period last year.

Wanke, however, was the only one of the “big four” real estate giants in China to witness a sales boom, to the tune of 54.91 billion yuan.

Medium and small-sized real estate enterprises, including Roshine Group, Midea Group and Zhongnan Group, all faced downturns in sales performance last month.

According to CRIC, China’s leading real estate big data application service provider, and EH Consulting, a think tank majoring in the real estate market, sales of top 100 real estate enterprises fell 12 per cent year-on-year last month, while top 200 firms saw sales drop 10.2 per cent.

Sales in first-tier cities declined 15.1 per cent from the previous year, with Guangzhou seeing the biggest month-on-month drop at 60.3 per cent, E-H Consulting noted.

E-H Consulting pointed out there were two main reasons for the gloomy real estate market last month. Huge promotions in December pumped up trading volumes, causing the number to fall on a relative basis. On the other hand, the epidemic breaking out during Spring Festival holidays also had a negative impact on third- and fourth-tier home-buyers.

Some industry insiders told the 21st Century Business Herald that they still remained optimistic about the real estate market this year. The epidemic has delayed market demand rather than eliminated it, they said, and the outbreak will have an important impact on potential buyers’ decisions, making them re-examine quality, property services and other factors in making a home purchase.

January and February are traditional off-season months for the real estate market, but cash flow problems are becoming more troublesome as the epidemic spreads across the country.

E-House CEO Ding Zuyu said cash flow was the biggest risk enterprises face.

“If there was no sales, cash flow pressure would be undoubtedly huge, especially for small and medium-sized corporations. Tightening funding and the pressure of being merged made the companies’ outlook seem gloomy,” he said.

In addition to sales stagnation, real estate enterprises also need to solve the problem of debt repayment.

CRIC data shows that a total of 557.5 billion yuan in bonds will mature this year for 95 typical real estate companies, an increase of 43 per cent compared with the amount of bonds maturing last year.

“Before the outbreak, solvency of housing enterprises was generally under control, but recently sales slowed down, so we need to pay special attention to the short-term liquidity problem,” analysts at CRIC and E-H Consulting wrote.

The report noted leading real estate enterprises have stepped up financing to make up for the short-time cash flow gap.

Evergrande announced on January 16 and 21 that it would raise $6 billion in debt in four separate rounds, with interest rates ranging from 11.5 to 12 per cent.

Country Garden also said it would issue two public offering bonds of $8.54 billion to repay the debts.

Ding said the current conditions of the real estate industry were closely related to the epidemic, and would depend on whether it could be effectively controlled.

“Once the outbreak is contained, the housing market will slowly recover and sales will also see a rebound.

“Confronted with the economic condition, it’s believed the government will also introduce some stimulating policies such as interest rate cuts and reserve ratio reductions, which will have a positive effect on the real estate market,” Ding said.



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