Flagging sales and tight credit may be causing more hurdles for China’s real estate developers than has previously been acknowledged, according to a report last week in Caixin.
The Chinese financial newspaper spoke to a number of industry observers including officials from state-run developers and representatives from credit rating agency Moody’s who foresee financial shortfalls bringing about consolidation in the industry with little meaningful policy relief.
Although there have been some indications that real estate policies may be “fine-tuned” this year, the analysts and industry players that Caixin spoke with remained skeptical about the availability of financing for real estate developers.
Speaking to Caixin, Zhong Wenquan, a vice president with Moody’s Investors Service foresaw particular hardships in 2012 for mainland developers listed in Hong Kong. According to Caixin,
Zhong said Moody’s is now “most worried about” developers who previously borrowed from overseas investors or whose stocks trade in Hong Kong, and are not allowed by regulators to issue bonds for fear they won’t repay the debt.
Some may be unable to repay foreign investors, he said, at a time when “the overseas financing market is very bleak right now, and the overall international economic situation is not optimistic.”
Just in case you are still wondering who will come out of the current developer crisis as the winners, an executive at a central government developer told Caixin that while lending will be tight across the board in 2012, he believed that,
“State-owned enterprises may have some advantages and may get a few more loans than others.”
So watch this space in the coming weeks for news of large, central government-controlled developers “assisting” smaller private or local government controlled developers by taking over sizable chunks of their shares or buying their assets.
Centralising control of real estate assets under state-owned enteprises controlled directly by the central government. Why does that sound familiar?