Chinese developers begin new year with deepening debt woes
Their financial deterioration comes despite Beijing’s efforts to stabilise the housing market
CHINESE property developers are starting 2025 facing liquidation petitions, sliding share prices and mountains of debt, as the nation’s real estate crisis enters its fifth year with little sign of improvement.
On Friday (Jan 10) morning, shares of defaulted Chinese builder Sunac China Holdings fell as much as 30 per cent in Hong Kong, the most since Oct 8. That was after the company, a white knight to a major peer a few years back, received another winding-up petition.
Sunac, whose projects including high-end residential complexes in Beijing, restructured its offshore debt in 2023, but has been hit by concerns about its ability to meet new repayment obligations.
Meanwhile, China Vanke, one of the country’s largest property developers, has US$4.9 billion of debt coming due this year as worries grow about its liquidity and whether it will be able to find new financing to avoid defaults. Vanke’s 3.5 per cent US dollar bond due 2029 is down about 7 cents year to date, falling to its lowest level since September, Bloomberg-compiled data show.
In another signal of gloom for the sector, a Bloomberg Intelligence gauge of Chinese property developers is down about 12 per cent so far this year, far more than the 4 per cent drop for both the benchmark Hang Seng Index and CSI 300 index.
The financial deterioration of many developers comes despite Beijing’s efforts to stabilise the housing market. The government has cut borrowing costs on existing mortgages, relaxed buying curbs in big cities and lowered taxes on home purchases. It also trimmed purchasing costs for people seeking to upgrade dwellings in some big cities.
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Even so, the overall housing sector has shown minimal signs of recovery, with sales from the top 100 builders slumping 28.1 per cent last year compared with a 16.5 per cent drop in 2023.
“Unless home sales recover quickly, the phantom of weak cash flows can continue to haunt China’s high-yield property developers,” said Gary Ng, senior economist at Natixis. Improvements in the sector have been concentrated in Tier-1 cities so far, but the problem is much bigger in smaller cities, he added.
On Friday, a key offshore subsidiary of China Evergrande was ordered to liquidate by a Hong Kong court. Three other major developers including Country Garden Holdings and Times China Holdings are also set to defend against liquidation petitions in Hong Kong this month.
Many of the builders are still working on restructuring. Country Garden just proposed new terms with key banks that would slash its debt and lower borrowing costs, but a key bondholder group isn’t on board, people familiar with the matter said.
Defaulted developer Logan Group also recently unveiled a revised term sheet for its US$8 billion offshore restructuring.
But without a significant recovery in the sector, developers will continue to struggle meeting repayment deadline. Chinese builders who were previously affected by the property crisis will be the biggest source of defaults in Asia in 2025, according to analysts at JPMorgan Chase.
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