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Sluggish home sales unlikely to trigger major defaults by developers

2020-3-24 12:10

Potential homebuyers look at a property model in Huai'an, Jiangsu province, on Sunday. [Photo by Zhao Qirui/For China Daily]

 

Sluggish property sales amid the novel coronavirus outbreak will not trigger large-scale defaults by property developers nor systemic financial risks, experts said on Monday.

 

The brisk recovery in property sales and easier financing options will help avoid any major risks, but some small and medium-sized developers may see credit quality souring, they said.

 

China's property market has remained depressed due to the social distancing amid the outbreak, as nationwide property sales-both by area and by value-dropped nearly 40 percent year-on-year in the first two months of the year, according to the National Bureau of Statistics.

 

The slump has sparked concerns that sluggish property sales may threaten cash flow stability of real estate developers and lead to defaults, placing a landmine in the financial system given the sector's huge amount of borrowing.

 

Chinese developers rated by Moody's will have $51.2 billion of onshore bonds maturing or subject to put options in the 12 months from March, accounting for 60 percent of total onshore and offshore bonds maturing or becoming puttable over the period, according to the global credit ratings agency. Put options allow investors to demand bond redemption before maturity.

 

Risks have already started to surface. Macrolink Culturaltainment, a Shenzhen-listed developer of cultural tourism projects, announced in early March that its parent company, affected by the epidemic, could not redeem the 1 billion yuan ($141 million) principal of a matured bond.

 

Yet Moody's regards default risks of the sector controllable.

 

"We expect the liquidity of rated Chinese developers to weaken in the first quarter of this year because the coronavirus outbreak will disrupt property sales. However, we expect most rated developers will have sufficient liquidity buffer against the disruption in sales," said a Moody's report.

 

A more accommodative financing condition has helped developers to replenish liquidity and repay debts. Eligible companies only need to register with authorities instead of seeking approvals to issue bonds from March 1, benefiting from a shortened lead time for domestic bond issuance, the report said.

 

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, said the financing conditions faced by property developers are expected to continue improving amid authorities' efforts to guide lending rates lower and facilitate bond financing to bail out businesses in need.

 

Meanwhile, regulators may intensify supervision of developers' use of the newly-borrowed funds, to avoid their illegal diversion to land use purchases and inflating property bubbles, Yan said.

 

The China Banking and Insurance Regulatory Commission, the regulator, has reaffirmed the principle of "houses are for living and not for speculation" and vowed to continue promoting the steady and healthy development of the property market on Sunday.

 

Wu Chaoming, chief economist with Chasing Securities, said the rapid recovery in property sales will also keep default risks subdued.

 

As of Saturday, 5.61 million square meters of property were sold in the 30 large and medium-sized mainland cities this month, versus 2.43 million sq m for the whole of February, according to Wind Info.

 

Wu expected the recovery in property sales to further gather pace as the epidemic has been brought under better control domestically. "Default risks of property developers will gradually ease and therefore will not induce systemic risks," he said.

 

Liu Xiaoliang, an analyst with S&P Global (China) Ratings, said losses from the outbreak are "recoverable" for Chinese developers, with sales in the first and second-tier cities as well as core cities of urban clusters set to recover as the outbreak recedes.

 

Full-year real estate sales by area and value are likely to fall by around 5 percent compared with last year, and credit quality of the real estate development industry is expected to remain stable this year, Liu said in a report.

 

However, Liu said that developers with high property inventories in the third and fourth-tier cities may see their credit quality weaken as demand may not hold up like in core cities, and so could small and medium-sized developers with insufficient cash reserves.

 

Yan expected more policy measures at local levels to ensure market stability and release housing demand, such as providing subsidies for residents purchasing property, adding that the peak of developer default risks may come in the second quarter due to depleted cash reserves.

 

周日,江苏省淮安市的潜在购房者在看一套房产模型。[中国日报赵其瑞摄]


专家周一表示,在新型冠状病毒爆发之际,房地产销售低迷不会引发房地产开发商大规模违约,也不会引发系统性金融风险。


他们表示,房地产销售的快速复苏和更容易的融资选择将有助于避免任何重大风险,但一些中小开发商可能会看到信贷质量恶化。


根据国家统计局的数据,中国的房地产市场由于爆发的社会分化而持续低迷,全国范围内的房地产销售——按面积和价值计算——在今年前两个月同比下降了近40%。


这一暴跌引发了人们的担忧,即房地产销售低迷可能威胁到房地产开发商的现金流稳定,并导致违约,鉴于该行业的巨额借款,这将给金融体系埋下一颗地雷。


根据穆迪的数据,从3月开始的12个月内,穆迪评级的中国开发商将有512亿美元的在岸债券到期或受认沽期权限制,占在岸和离岸债券到期或可变现债券总额的60%。看跌期权允许投资者在到期前要求赎回债券。


风险已经开始显现。在深圳上市的文化旅游项目开发商Macrolink Culturaltainment 3月初宣布,受疫情影响的母公司无法兑付10亿元(合1.41亿美元)到期债券本金。


但穆迪认为,该行业的违约风险是可控的。


“我们预计,由于冠状病毒的爆发将影响房地产销售,今年第一季度被评级的中国房地产开发商的流动性将会减弱。”然而,我们预计多数评级为房地产开发商将拥有充足的流动性缓冲,以应对销售中断,”穆迪的一份报告表示。


更为宽松的融资条件帮助开发商补充流动性和偿还债务。该报告称,从3月1日起,符合条件的公司只需向有关部门登记,而无需寻求批准即可发行债券,这得益于国内债券发行提前期的缩短。


总部位于上海的易居中国研究与发展机构主任严跃进表示,随着政府努力引导贷款利率下降,为有需要的企业提供债券融资,房地产开发商面临的融资条件预计将继续改善。


与此同时,监管机构可能会加强对开发商使用新贷款的监督,以避免开发商非法挪用资金购买土地,并吹大房地产泡沫。


中国银行保险监督管理委员会重申了“住房是用来居住的,不是用来投机的”的原则,并承诺将在周日继续促进房地产市场的稳定和健康发展。


大通证券首席经济学家吴超明表示,房地产销售的快速复苏也将抑制违约风险。


据万得资讯的数据,截至上周六,本月30个大中城市共售出房产561万平方米,而2月份全年共售出房产243万平方米。


吴预计,随着疫情在国内得到更好的控制,房地产销售的复苏将进一步加快步伐。他表示:“房地产开发商的违约风险将逐步缓解,因此不会引发系统性风险。”


标准普尔全球(中国)评级公司(S&P Global (China) Ratings)分析师刘晓亮表示,随着疫情的消退,中国开发商在一、二线城市以及城市集群核心城市的销售将出现回升,疫情造成的损失是“可以挽回的”。


刘在一份报告中表示,与去年相比,全年房地产销售面积和价值可能下降约5%,今年房地产开发行业的信贷质量预计将保持稳定。


然而,刘表示,在三、四线城市拥有高房地产库存的开发商可能会看到他们的信贷质量下降,因为需求可能不会像在核心城市那样保持稳定,而现金储备不足的中小开发商也可能出现这种情况。


严冬预计,地方政府将出台更多政策措施,以确保市场稳定并释放住房需求,比如为居民购房提供补贴。他补充称,由于现金储备枯竭,开发商违约风险可能在第二季度达到峰值。

 

原作者: Zhou Lanxu 来自: china daily