China’s real estate market woes have been exposed through the latest figures, with cash flows shrinking and profits turning negative.

Citing data from Oxford Economics, CNBC reported that Chinese property developers’ cash flows plummeted to 15.2 trillion yuan ($2.3 trillion) as of July 2022 versus 20.11 trillion yuan in 2021.

It means that total funding in China’s property market plunged 24.3% year-on-year, after growing for nearly every year since at least 2009.

The cash flows changed course after the Chinese communist regime began to crack down on real estate leverage in 2020. The regime has been targeting the developers relying heavily on debt for growth.

Since the crackdown, the mainland’s real estate industry has fallen into a debt crisis. Some property giants such as Evergrande Group, Shimao, Sunac China and Greenland Group have defaulted.

Recently, the Chinese developers have also dealt with the boycott of homebuyer prepayments, who want the property companies to complete their unfinished projects and speed up the handover of their houses.

Tommy Wu is the lead economist at Oxford Economics.

In a report last week, he wrote: “The crux of the problem is that property developers have insufficient cash flows – whether because of debt-servicing costs, low housing sales, or misuse of funds – to continue with projects.”

Wu added, “Resolving this problem will rebuild homebuyers’ confidence in developers, which will help support housing sales and, in turn, improve developers’ financial health.”

As investors are turning away from the market, dozens of Chinese property developers suffered losses in the first half of this year.

A new report revealed that more than 50 real estate companies in the mainland have released preliminary results for the first six months of 2022. Accordingly, the number of loss-making companies increased significantly from previous years.

Regarding the reasons for their losses, CCRE Real Estate said that the progress of their projects was delayed and the volume of house handover decreased due to Covid measures. In addition, the decreased demand for commercial leasing is another reason for the loss. 

According to the statistics of China Index Research Institute, from January to July, the average sales of top 100 real estate companies was 41.89 billion yuan ($6.2 billion), a year-on-year decrease of 47.3%.

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