“We are indeed seeing a very serious slowdown in the property market,with falling prices,sales and construction activity,and this is likely to drag down economic growth in the next couple of quarters,” said Arthur Kroeber,managing director of Gavekal Dragonomics,an independent economic research firm.
Evergrande was once a paragon of China’s real estate boom. More recently,though,it has shaken global markets with news of a possible collapse. It has missed several key payments to foreign investors in recent weeks. On Monday,it missed another round of interest payments on two US dollar bonds,a person familiar with the matter said,requesting anonymity because the information is confidential. Waiting for a lifeline,it halted its shares last week and announced the potential sale of a lucrative unit.
Construction has been halted at many of Evergrande’s developments.Credit:Bloomberg
The company’s troubles have elicited recent comments from central bankers around the world and even the US Secretary of State,who urged China to “act responsibly” in handling Evergrande’s future.
China’s 100 biggest real estate companies are expected to report that sales in September plummeted by more than a third compared with a year earlier,according to China Real Estate Information,an industry data provider. Fantasia,a developer known for luxury properties,unexpectedly defaulted last week,sending shock waves through the financial markets.
The month may have been worse for Evergrande. The developer has already warned investors that it expects a “significant continuing decline” in sales. And as its cranes and hammers stop in cities across the country,some 1.6 million homebuyers remain in limbo waiting for their apartments.
He Qiang said his friends and neighbours who were once interested in buying real estate now tell him they worry about putting a down payment on an apartment that might never be built. Families once lured by Evergrande’s slick sales offices and impressive marketing are staying away.
Without a clear message that Beijing will help Evergrande and other developers continue construction projects and deal with the enormous debts,many Chinese families are holding on to their money and holding off buying new homes.
“People worry,‘If I buy now,what if the developer has a sale later?’” He said.
He doesn’t blame them.
Evergrande stopped the work on his own apartment in June. Construction at three of its other sprawling projects in his city have either stopped or are expected to stop because builders said they have not been paid. The dramatic headlines focused on property in China are likely to keep homebuyers away for longer than just a month or two.
Online government forums designed to receive feedback from local citizens are now inundated with complaints from angry families who bought apartments from Evergrande. Some wondered if they should keep paying the mortgage on a property that hasn’t been completed. One used the forum to ask if his lifelong savings would simply be “thrown into the water” if Evergrande were to go bankrupt.
A group of homebuyers on a forum in Guangzhou said they learned that Evergrande had placed the money from their down payments in a private bank account and not the one stipulated by the local authority and monitored closely. Another homebuyer in the city of Meishan in China’s Sichuan province used the forum to plead with officials,“Please uphold justice for your people!”
China’s central bank last month issued a rare comment saying it would monitor the real estate market.Credit:Bloomberg
Even as prominent investors question whether an Evergrande collapse could lead to China’s so-called Lehman moment,referring to the investment bank that triggered the 2008 global financial crisis,Beijing has been largely silent,having vowed to no longer rescue companies once considered too big to fail. Many local officials have been left on their own to respond to the growing frustration.
Local governments in cities as far and wide as Shiyan,Shenyang and Chongqing have each set up special task forces to help manage the potential fallout. One official in the southern city of Shifang,responding to complaints on a government forum,said the local construction regulator,the police and other government bodies met and informed the developers and contractors of “the grim consequences” they faced because of delayed construction.
The regulators who engineered the property slowdown have started to make moves to bolster the sector if things get worse. China’s central bank last month issued a rare comment saying it would monitor the real estate market. While a reckoning in the financial markets is unlikely,the central bank has also opened emergency spigots to make it easier for local banks to draw more money,just in case.
Without a clear message that Beijing will help Evergrande and other developers continue construction projects and deal with the enormous debts,many Chinese families are holding on to their money and holding off buying new homes.
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He Qiang is still waiting to hear from Evergrande about his apartment. Although the developer has not sent him a notice of delay,he can see that construction on his building stopped several months ago,and has had to reconsider his plans to get married in May. The apartment was supposed to be finished by the end of the year,giving him time to decorate so that the space could feature prominently in the wedding festivities.
“Now with this delayed construction,” He said,“the wedding will be postponed,too.”
The New York Times
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