As the restrictions on China’s residential real estate market continue to hit home, two more privately owned developers filed for bankruptcy last week. These latest filings follow soon after Hangzhou Glory Real Estate filed for relief from its creditors on March 30th.
According to a report in the South China Morning Post, Guangdeye Property Development, based in the city of Shunde, Guangdong province has filed for bankruptcy with the courts in Shunde. And during the same week, Hangzhou Jinxiu Real Estate, which was developing a luxury serviced-apartment project in in Hangzhou also applied to the courts for relief from its debts.
The bankruptcies of these smaller developers are evidence of the pressure that is coming bear on the residential real estate sector as companies which borrowed money to build housing projects find themselves unable to repay their debts as residential sales have evaporated since market restrictions were put in place.
Unable to borrow additional money from banks, it is expected that many small developers will have to sell assets to larger firms with better access to financing, and that more bankruptcies will follow.
Even larger property firms have found themselves overextended and been forced to sell off projects to keep themselves afloat. Only last week, Greentown China sold a major mixed-use development in Shanghai to SOHO China after gorging itself on credit during the 2008-2009 government market stimulus.