Rebuilding China’s property market
The outlook for the Chinese real estate sector is bleak, with many more highly indebted companies expected to default on their bonds and loans. If the market is to recover, however, the government will need to ease more restrictions so that firms can access funding again and demand for homes picks up.
China’s property market – worth close to $2.7 trillion and accounting for 29% of GDP – is in trouble. For evidence, look no further than the bond market.
In the first five months of this year, 22 Chinese high-yield bond issuers, all related to the property sector, either defaulted on their dollar debt or deferred repayment with bond exchanges. Nearly 77% of high-yield, rated bonds were trading some way below par, at less than 70 cents to a dollar, by the middle of June.
In May, analysts at Goldman Sachs predicted that one third of China’s property firms will default this year, and raised its default rate forecast for the high-yield real estate sector to 31.6%,