Evergrande’s rise and fall leaves scars on China’s property sector
On January 29, 2024, a Evergrande commercial complex in Beijing.
Greg Baker | AFP | Getty Images
China Evergrande Group From the Hong Kong Stock Exchange On Monday-for the highly flying developer, he once epitomized the economic rise of Beijing and then symbolized the country’s property bust.
After the 2009 list, Evergrande became one of the hottest stocks of China, and the market value of the company increased to $ 51 billion in 2017. According to LSEG data, the market value of the company’s shares by ordering a liquidation order, which has fallen above $ 280 million, was suspended.
Evergrande, once China’s largest developer with sales, will now be remembered as the world’s most debtor developer with more than $ 300 billion debt, and default has launched a broader crisis that dragged the country’s economic growth.
Beijing was one of the oldest developers in 2021 after revealing three red line policies. Policy aimed at restarting aggressive borrowing, which triggers a liquidity crisis throughout the sector.
China’s housing decline, prices, sales, investment and construction activities decreased throughout the board of directors and the fourth year of economic growth.
New house prices in China fell to the fastest speed in June in June and decreased by 3.2% annually before a slightly recovery of 2.8% in July, Real Estate Investments Deepered.
Extinguishing Real Estate Balloon
Evergrande loosening after opening the collapse of a long -lasting property falling into a wider economy, but analysts expect to facilitate the drag in the coming years.
“China’s real estate balloon has reached its peak in 2021 and has been extinguishing since then.” He said. Authorized, new housing properties sales volumes for four years, he noted. The economist has fallen half in smaller cities and suburbs of big cities and said it fell to 30% in the central areas of cities 1.
“The adjustment is not over. However, the economy has already absorbed most of the effect.”
Changchun Hua, the Chief economist of the Great China in KKR, made a 1.5 percent point on China’s gross domestic product with 2.5 percent points in 2022, “China’s housing market correction continues to be a head wind,” he said.
According to HUA’s forecasts, the drag will continue to shrink with only 0.3 percent points in 2027.
One High -level policy meeting Last week, Chinese Prime Minister Li Qiang stressed that more effective measures are needed to address the real estate market and to stabilize market expectations. China’s property and construction sector formed more than a quarter of China’s GDP before Beijing’s pressure on developers on the over debt of developers.
On Monday, the Shanghai government announced a number of measures to increase home demand, including allowing unlimited number of houses in the external suburbs of appropriate families and calling for lower mortgage rates. This, Beijing Municipal Government At the beginning of this month, he removed the purchase restrictions of the houses on the skirts.
According to Daiwa Capital Markets Chinese property analyst William Wu, Chinese developers’ shares gathered on Monday morning optimism.
‘Flight to Security’
Lucror Analytics, Senior Credit Analyst Leonard Law, most special developers already default and debt restructuring, “We pass the default wave,” he said.
Global Property Consultancy Christine Li, President of Asia-Pacific Research in Knight Frank, said that some of Evergrande’s peers may face similar delicious risks. According to Li’s estimates, twenty -twenty of such developers have been approved for debt restructuring plans since the beginning of this year and borrowed more than 1.2 trillion Yuan ($ 167 billion).
Beijing called Local governments will give faster loans to developers suffering from cash shortages and reported As part of the effort to stabilize the sector, to think of the plan to mobilize government companies to take over the houses that are not sold from troubled developers.
Although more developer default risk has decreased, consolidation around state -supported developers seem to be inevitable, as it leaves multi -year crisis hosts more cautious than before.
Cathy Lu, a credit analyst in Octus, is known as Regr, a financial data company that has previously specialized in debt restructuring, “Now buyers support state developers and have completed their property on priorities.” He said.
MacRrolens Manager Brian McCarthy said that most of the major developers, who are about to be “zombie companies”, will be rounded into state machines. He predicts that state institutions will enter and finance the completion of unfinished units.
“State developers will carry out the entire industry. Political makers in China will never allow this balloon to approach something like [what] We have seen in the last 15 years, “he said.
The shell of a property empire
In January last year, a court in Hong Kong ordered the liquidation of Evergrande’s local assets after submitting a petition to the creditors and appointed Alvarez & Marsal, who helped to relax the brothers of Lehman.
So far, progress has been slow. Abroad creditors, while most of the assets of Evergrande were sitting in the motherland, they withdrew only a part of their debt.
Evergrande still has at least hundreds of unfinished projects throughout the country, hundreds of thousands of host hosts waiting for their homes and a long creditor that provides materials from workplaces in China to Jostling bond holders to compensate for their losses to Evergrande.
“Evergrande continues to deliver home,” he said. Evergrande said he had delivered 1.2 million houses in the last four years. More than 95% of the sold units were completedAccording to the state media reports, referring to a company representative.
However, the creditors continue to encounter uncertain reimbursement expectations. Although the open marine presence has been in the process of liquidation since last year, the large land units of Evergrande have also bankrupt and offer very little restructuring value.
Hong Kong liquidators filing At the beginning of this month, Evergrande’s debt burden was much larger than predicted and Any “holistic” restructuring is unattainable. Evergrande’s The pile of debt costs 45 billion dollars27.5 billion dollars of obligation announced in 2022’s financial statement He said liquidators.
Despite the liquidation efforts, the overseas bond holders and shareholders will be destroyed to a great extent, Mac Macrolens’ McCarthy. “For overseas investors who invest in China through Hong Kong, you have a limited application for land assets if things get worse.”
