GT Online: The End of Communist China’s Real Estate Boom
Written by: WENJIE
Translated by: billwilliam
Proofread by: Ermat
Following debt scandals in developers like Tahoe Group, China Fortune Land Development, and Blu-ray Development, the intensifying crisis at Evergrande Group has made financial institutions more vigilant about the debt risks of real estate developers, as reported by the website eastmoney.com.
The article analyzes all the routes of financing for real estate developers:
1. The scale of real estate trust financing has been declining for 12 consecutive months, with an average monthly drop of 41.03%. Besides pressure from financial operations, the main reason is the surge in risk of real estate trust because of risk events in large real estate developers.
2. As for private equity in real estate, systemic risk events in realtors such as Blu-ray Development and China Fortune Land Development cause real estate private equity funds to apply more stringent risk control standards, resulting in a decrease in the number of real estate investment funds year over year.
3. Headwinds in overseas bond issuance. With the tightening of the regulation and frequent occurrence of negative incidents in the real estate sector, offshore debt financing of real estate has been sluggish.
4. Banks are more reluctant in lending. Because of rising balances of non-performing loans and rising ratio of non-performing loans in the real estate sector for most banks, the banks are inevitably more vigilant in lending.
The article concludes that higher risk of default has rattled the nerves of all capital investors, and amid further tightening of financing for the real estate sector, the sector’s financing experiences shortage in cashflow.
In my opinion, no real estate company can survive the wave of bankruptcy, given the systemic corruption pervading throughout the entire society of Communist China. In the future, more real estate companies will be embroiled in scandals, as a quote in the news article wrote, “the era of real estate boom is over.”