Chinese property developers’ 2023 results hit by sector downturn

A STRING of Chinese property developers reported weaker financial results for 2023 on Thursday (Mar 28), including Vanke, China’s second largest property developer by sales, where core profit fell 50.6 per cent.

China’s property sector, a pillar of the economy, has lurched from one crisis to another since 2021 after a regulatory crackdown on high leverage among developers triggered a liquidity crisis.

Overall housing sales declined 6.5 per cent in 2023 from the previous year and 35.9 per cent from the industry high in 2021.

Country Garden, the country’s largest private property developer, on Thursday delayed the publication of its 2023 financial results, saying it needed to collect more information to make appropriate accounting estimates and judgements. The company defaulted on US$11 billion of offshore bonds late last year.

State-backed Vanke’s core profit, which excludes foreign exchange impact and change in the value of assets and financial instruments, was 9.8 billion yuan (S$1.8 billion).

Vanke’s net profit fell 46.4 per cent to 12.2 billion yuan while revenue dropped 7.6 per cent to 465.7 billion yuan. Interest-bearing debt rose around 1.9 per cent to 320 billion yuan, for a net debt ratio of 54.7 per cent, 11 percentage points higher than 2022.

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Investors have been dumping Vanke’s shares and bonds in the past few weeks, triggering a rare central government directive to help the Shenzhen-based developer beat a liquidity crisis.

Regulators asked financial firms and creditors to step up financing support for Vanke, Reuters reported this month.

Local policymakers’ stimulus and easing measures have struggled to boost sales or increase liquidity, while many property developers have defaulted on debt obligations.

Vanke said in a separate statement that it expected more supportive measures from the Shenzhen government would be implemented in the future, following an announcement from its major shareholder state-owned Shenzhen Metro, that it would subscribe around one billion yuan in Vanke’s consumption Reit (Real Estate Investment Trust) which is to be listed.

Beijing-based Sunac China, once a top-5 developer in the country and the first developer to complete an offshore debt restructuring in the crisis, reported earlier on Thursday a net loss of eight billion yuan for last year, versus a net loss of 27.7 billion yuan in 2022.

Smaller rivals, Kaisa Group and KWG Group, reported widening net losses of 19.9 billion yuan and 18.7 billion yuan, respectively.

But some state-owned developers are faring better as some homebuyers turn to policy-supported companies to make sure their homes are completed.

China Overseas Land & Investment said its net profit rose 10 per cent last year to 25.6 billion yuan, though core profit eased slightly by 3.2 per cent to 23.7 billion yuan. REUTERS