China developers' sales plunge as Evergrande contagion emerges

[BEIJING] Major Chinese developers saw their sales plunge last month as China Evergrande Group sank deeper into crisis, putting more pressure on the government to limit the fallout.

Combined contracted sales by the country's top 100 real estate companies plummeted 36 per cent in September from a year earlier, deepening a new round of downward spiral emerging in July, China Real Estate Information Corp said in a report.

More than 90 developers saw a decline in their sales from a year ago, with 60 per cent of them recording a drop of more than 30 per cent, the report says.

Under the current market conditions, real estate enterprises need to speed up development, ensure supply, strengthen marketing and accelerate to recoup cash in the fourth quarter, the official Shanghai Securities News cited Lin Bo, general manager of the property consulting firm, as saying in a report.

"In the medium to long term, reducing leverage is still the focus of real estate enterprises," Lin added.

China's relentless efforts to cool its property market and rein in financial risks have resulted in a sharp drop in real estate demand in the past few months, squeezing heavily-indebted developers like Evergrande and sparking concerns of a debt contagion in the industry.

Mid-sized Fantasia Holdings Group, which develops high-end apartments and urban renewal projects, defaulted on a dollar bond earlier this week, reigniting investor angst over other highly leveraged borrowers.

The slowdown in the country's residential market deepened in September, traditionally a strong month for property sales. In the financial hub of Shanghai, property sales volume dropped 45 per cent last month from a year earlier, while Beijing, Shenzhen and Guangzhou saw a decline of 30 per cent, according to report.

Domestic home sales by value already slumped 20 per cent in August from a year earlier, according to official data, the biggest drop since the onset of the coronavirus shut swathes of the economy at the start of last year.

Apparently worried about its impact on the broader economy, the Chinese government has taken measures to limit the fallout from its property crackdown.

Late last month, the central bank told financial institutions to cooperate with governments to "maintain the steady and healthy development of the real estate market" while safeguarding homeowners. The regulators have asked banks to refrain from cutting off funding to developers all at once. BLOOMBERG