Real estate sector continues to struggle despite efforts, as major developers face mounting debt
China’s property market crisis has now entered its fourth year, with no clear signs of recovery despite a series of government interventions aimed at stabilizing the sector. Some of the country’s top developers, like Gemdale Corp and China Vanke Co, have been struggling under massive debt, sending their bond values plummeting. The bond market for Chinese developers has experienced a dramatic collapse, with a staggering 87% loss in value over the past two years, wiping out $135.5 billion.
The government’s attempts to revive the industry through policies, including support for developers’ financing and homebuying, have failed to boost market sentiment. Housing prices, which fell the most in eight years in October 2023, reflect the ongoing downturn. The market is now calling for a radical new approach, with analysts suggesting that the current real estate management models must be reformed.
The crisis is now affecting a wider range of developers, including state-backed firms. Analysts warn that if the weak market conditions persist, the risk appetite of financial institutions could shrink further, exacerbating the liquidity crunch for developers.
In an effort to address the growing challenges, the government is revisiting the idea of creating a new development model, with a particular focus on affordable housing and urban renovation projects. The central government is looking to emulate Singapore’s successful approach to affordable housing, where public demand is primarily met through government-backed construction while commercial housing addresses the demand for improved living conditions.
However, before these new policies can take effect, major developers like Gemdale and Vanke are grappling with significant financial challenges. Gemdale’s bond prices have plunged, and its sales have dropped by 27.5% year-on-year. Vanke, once known for its cautious approach, is also facing a significant decline in bond values. If these prominent developers fail to weather the storm, market confidence could deteriorate further, and their financial difficulties could worsen the broader property market crisis.
The Chinese property sector is at a crucial juncture. While new affordable housing initiatives may provide some relief, the broader market recovery hinges on overcoming deep-rooted financial struggles, investor skepticism, and an ongoing slowdown in the real estate market.
