Country Garden’s sales slump persists as revival proves elusive
Weak domestic demand and a fragile job market continue to weigh on China’s housing market, which is now in its fourth year of decline
[NEW YORK] Country Garden Holdings’ sales slide continued in March, with the developer faring worse than the broader China housing sector.
The Foshan-based company’s monthly contracted sales dropped 25.3 per cent from a year earlier to 3.2 billion yuan (S$591 million), Bloomberg calculations based on corporate filings show.
While that was an improvement from a 38 per cent year-on-year slump in February, the decline was from an already low base, and was much steeper than the country’s top 100 developers’ 11 per cent drop in new home sales in March. Country Garden’s first-quarter sales totalled just 7.8 billion yuan, a far cry from its heyday.
Weak domestic demand and a fragile job market continue to weigh on China’s housing market, which is now in its fourth year of decline. People remain wary about developers’ ability to finish projects on time, leading new-home sales to drop in March after a brief period of stabilising.
The outlook has been further clouded by a dramatic escalation in the trade war between the US and China, which has sent Chinese equities plummeting and could deal another blow to consumer confidence in the world’s second-largest economy.
Country Garden has been counting on a turnaround in sales while the 33-year-old developer continues lengthy restructuring talks more than a year after defaulting on its debt.
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The company said that challenges in ensuring housing delivery are “complex”, according to a statement citing a March management meeting.
In January, the company told a Hong Kong court that it expected to reach an agreement with creditors by the end of February, but it ended up missing the self-imposed target date.
Country Garden has again engaged Houlihan Lokey and China International Capital Corporation as financial advisers on its offshore debt restructuring, Bloomberg News recently reported, renewing ties with the two firms as it seeks to build creditor support for its debt plan.
The developer’s contracted sales for this year could test the 2012 to 2013 lows of 48 billion to 106 billion yuan, Bloomberg Intelligence analysts Daniel Fan and Hui Yen Tay wrote in a January note.
While Country Garden recorded steep write-offs for 2023 and laid the foundation for a smaller loss in 2024 and 2025, further impairment this year is possible as it has only written down about 11 per cent of its inventory, they added. BLOOMBERG
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