Many Chinese property developers are now facing payment deadlines for billion-dollar debts, fueling the ongoing debt crisis in the sector.
According to Caixin Global, about 200 major Chinese property developers have to pay 26 billion dollars of debts in June and July. Among them, 67% come from private developers, and oversea debts account for 56%.
The timing of the debt is not good as many property firms have to ask for debt extension due to limited access to new funding.
CNBC cited Moody’s, saying it has issued 91 downgrades for high-yield Chinese property developers in the last nine months.
The credit rating agency said that the number set a record high as it had issued just 56 downgrades for such developers in the 10 years as of December 2020.
To support the property market, the Chinese government and local authorities in over 100 cities have recently taken several steps such as cutting mortgage rates, lifting residence restrictions, providing subsidies, and paying smaller down payments.
However, Reuters reported that China’s property market outlook is expected to remain weak for the whole year.
Its poll shows that average home prices are estimated to drop 1.3% annually in the first half.
Housing sales are down 25% in the first half of 2022, much higher than the 14% decrease in February’s poll. Home sales for the country are expected to drop 10% for the whole year.
In addition, property investment is expected to decrease 5% in the first half of the year and down 2.5% for the year. Previously, analysts forecasted real estate investment would decline 2% in the first half and gain 1.5% in 2022.
Moody’s noted that a debt risk measure in Asia has reached above the 2009 crisis level due to a surge in downgrades of Chinese property developers since last year.
According to Moody, as of May, the share of most speculative ratings of “B3 negative” or lower in Asian high-yield companies has nearly doubled to a record high of 30.5% since last year.
The report said that number exceeded the 27.3% share during the global financial crisis in May 2009.