Why China’s property crisis could get more severe

Mar14,2024



from china real estate sectoralready grappling with significant challenges highlighted by the collapse of Evergreen, have to face troubles ahead. A huge decline is being seen in the property market home sale And a situation of decline in prices can be seen.
One of the immediate triggers could be the problem arising at Vanke, one of China's largest developers. Moody's has downgraded credit rating Vanke's, indicating ongoing difficulties within the national wealth sector.
Vanke, traditionally viewed as a stable entity, has faced significant financial stress, leading Moody's to downgrade its credit rating to “Ba1”, indicating “substantial credit risk”. is the connected level.
The agency reported a sharp decline in the company's contracted sales, which fell 40% to 34.5 billion yuan ($4.8 billion) in the early months of the year.
Moody's estimates that the uncertain operating and financing outlook will continue to negatively impact Vanke's contracted sales, funding availability and liquidity.
Vanke under the microscope
According to a report by Insider, Vanke has come under scrutiny as it is facing financial stress, evidenced by its efforts to extend loan maturities with insurers. Concerns about its liquidity have intensified as investors sold Vanke's shares and bonds. Despite efforts to reassure investors, including the recent $630 billion note repayment, the pressure on Vanke underlines the systemic importance of such large developers to the national economy, the Insider report said.
Charlene Chu, a senior analyst at Autonomous Research, indicated, “I think, at the moment, there is a perception in the market that activity levels have decreased so much that things can't get much worse, but that's actually not true. Is .” Chu emphasized that China is “in the midst of a property sector downturn and it may still be worse than before.”
Vanke's position is particularly delicate given its size and influence; A potential default could significantly undermine confidence in China's property sector, especially among state-owned entities. “I think it could really lead to a loss of confidence in almost every developer in the country if state-owned entities are not protected,” Chu said.
Furthermore, the unfolding crisis, although primarily domestic, has the potential to have broader global economic repercussions, adding layers of uncertainty to an already fragile market environment.
(with inputs from agencies)



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