[The Epoch Times, January 23, 2022](Comprehensive report by The Epoch Times reporter Lin Yan) The Wall Street Journal published an article on Saturday (January 22) that said,China’s real estateJust how bad things are in the market, Beijing’s 2021 lending restrictions on China’s real estate sector have sparked uncertainty for many market participants.
Falling home sales, surging corporate bond yields and waning confidence among investors and potential homebuyers are on an upward spiral. In addition, there is no market reaction to the official stimulus policy,Mortgage SuspensionThe numbers are still climbing.
Although market sentiment has improved slightly over the past few days, Chinese property developer Evergrande Group and several smaller property developers have already announced defaults, and more property developers may join the queue in the future. Only starting in 2022,China’s real estateThe market conditions of the industry are as follows.
sales drop
As part of achieving “common prosperity”, China’s leaders have almost completely cooled the hottest real estate market in 2021. Contract sales (the value of new contracts that developers sign with homebuyers) plummeted in the final months, causing many real estate companies to miss annual sales targets.
According to the China Real Estate Information Association, contracted sales for the top 100 developers in 2021 fell by an average of 9%, with declines in both price and volume. Official data showed that developers’ new starts fell by more than 11% in 2021, and real estate investment also declined in the second half of the year.
Some state-backed developers, such as China Vanke, have been relatively unaffected by the lending restrictions. However, large real estate groups without obvious official support and with relatively high credit ratings in the past, such as Shimao and Country Garden, have been affected to varying degrees.
Recent official statistics show that new home prices have started to fall, the first fall since early 2015. Statistics from 70 major cities show that second-hand housing prices are also gradually falling. Some local governments have introduced measures to prop up local house prices, including extending subsidies and warning developers against offering big discounts.
However, Beijing is also concerned about further and faster declines in property prices, a drag on broader economic activity, and authorities have recently begun to release some de-escalating rhetoric on property. Real estate is one of the main drivers of China’s economy.
China’s gross domestic product grew at the slowest pace in 18 months in the fourth quarter of 2021, up 4% from 6.5% in the same period in 2020, the latest official data said.
Debt market malaise
The malaise in China’s debt market has grabbed headlines in financial reports, in part because Chinese real estate makes up a large portion of Asia’s junk bond market, and investors are eager to see the reaction of foreign bondholders. The sudden downturn in Chinese real estate companies has also led to a sharp drop in the shares of many Hong Kong-listed Chinese developers.
In addition, tens of billions of dollars of bonds issued by Chinese developers in the past have not been repaid on schedule. Some developers did not pay interest or principal; others persuaded bondholders to exchange debt for new, less attractive securities, a process known as a distressed debt swap, often viewed by rating firms and investors tantamount to breach of contract.
Because Evergrande has not had “substantial contact” with overseas creditors, representatives of creditors said on Thursday (January 20) that they had hired lawyers to consider requesting enforcement measures and take actions to defend their legal rights.
Investors are skeptical about getting the developer’s full repayment of those debts. There’s a vicious circle here, as developers can’t pay their debts, causing investors to sell bonds; the sell-off in turn depresses new bond sales in the market, leaving many struggling developers with further defaults because they can’t get refinancing.
Developers have significant overseas debt to refinance in the first few months of 2022. Recent reports that China may make it easier for developers to obtain refinancing funds and boost stock and bond prices have remained on the sidelines of analysts and investors.
But for real estate companies that can’t quickly find other sources of funding — such as through asset sales or new loans or equity funding from wealthy controlling shareholders — the next step could still be a full-blown default, or coercing bondholders into debt. convert.
In late December 2021, a netizen named Hou Tu said, “As a gift of (Yanjiao) Sky Ocean City real estate (currently there are loans), first come first served, repay the loan yourself.”
There was also a post from a Yanjiao owner’s “this house is free” that circulated on social platforms in the same month. The text on the photo reads: “Because there are too many houses and I can’t pay the monthly payment, I don’t want this house, I will give it to you for nothing. You only need to pay the monthly payment, I just don’t want to be overdue.”
Due to its geographical proximity to the capital Beijing, Yanjiao used to be a hot spot for property buyers and investment. However, after the strictest domestic purchase restriction order was adopted in 2017, the market has not been able to get out of the predicament. worry.
According to the Asset Litigation Network of the People’s Court of the Communist Party of China, a considerable part of the creditors of the houses auctioned in 2021 are banking institutions, which shows that most of the debtors are the ones who cut off their donations.
“Many cities in China may follow Yanjiao into a housing recession due to lack of demand,” Wang Dan, chief economist at Hang Seng Bank China branch, told the Financial Times.
Zheng Yue, a mainland lawyer, revealed on Weibo: “The past year has been the most for (law firms) to accept mortgage suspension cases. In recent years, the mortgage suspension rate has increased year by year.”
He said that in 2021, the nationwide housing loan cut-off will reach 2 million units, and it is expected that there may be more in 2022. Many Chinese families are in trouble in life under the epidemic.
“Some people think that our mortgage is the same as the mortgage in the United States. If you lose your mortgage, you will lose your house. For the Chinese who value the concept of home, if you lose your mortgage, you will lose your life. This is really hopeless.” He wrote .
Netizens complained about the rare rate cut by the People’s Bank of China
In a statement after the December 2021 economic work conference of the Central Committee of the Communist Party of China, the word “steady” was mentioned 25 times, saying that the Chinese economy faced “triple pressures of demand contraction, supply shock and weakening expectations”.
The People’s Bank of China, China’s central bank, recently cut some key interest rates, including five-year loan rates often used as a reference for mortgage pricing, while the PBOC began releasing detailed monthly mortgage growth data. These moves clearly reassure the market that both supply and demand for home loans remain healthy.
However, the publicPBOC cut interest rates, The monthly energy supply of a million-dollar mortgage can save 30 yuan, and the response is indifferent. A real estate agent wrote on Weibo: “Compared with the price of a house that costs millions and millions, the monthly mortgage payment drop by 30 yuan is not very useful.”
A netizen “Paoze” said sarcastically: “Great news, invincible good news in the universe. Just like I want to pull an aircraft carrier, Party B sent me a small trolley.”
There are also netizens “Er Treasure Mom” who analyzed that the five-year LPR reduction by five basis points means that the total interest burden on the 2 million loan can be reduced by 20,000 to 30,000 yuan, but the change will not be immediately reflected in the monthly payment, because the mortgage loan The interest rate adjustment date is generally January 1st of each year, and it will not be changed until January 1, 2023, and the monthly payment in 2022 will remain unchanged.
Responsible editor: Lin Yan#