Country Garden’s home sales slump persists as aid fails to help

COUNTRY Garden Holdings’ home sales struggle dragged on last month, extending woes for the Chinese developer that’s already facing a wind-up petition.

Contracted sales for May plunged 76 per cent to 4.3 billion yuan (S$800 million) from a year earlier, following an 83 per cent slide in April, corporate filings by the Guangzhou-based company show. There was trend towards improvement, as May 2024 sales were 11 per cent higher than a month earlier, though they were still at the third-lowest level in at least seven years.

The sales drought may exacerbate the cash crunch for Country Garden, whose crisis entered a new chapter after it made a surprise announcement in March that it will miss a deadline for reporting annual results due to insufficient information. Earlier this year, a Hong Kong court received a creditor’s petition to wind up the company following its default on US dollar debt.

China’s central government rolled out its most forceful rescue package last month to halt the three-year downturn in the sector. Guangzhou, where Country Garden is based, is among cities that have followed through by lowering down payment ratios and minimum mortgage rates.

However, loosening home-buying rules in largest cities may not help Country Garden, as they divert housing demand from low-tier cities to larger ones, Bloomberg Intelligence property analyst Kristy Hung wrote in a recent note. Country Garden is the least exposed to tier-1 and strong tier-2 cities among the Chinese developers covered by BI.

Country Garden has stuck to a strategy to target smaller cities for years to avoid some of the more onerous property curbs levied in the country’s major hubs. BLOOMBERG