China property sales could plunge by one-third, analysts say, as crisis deepens
Property sales in China could fall by one-third this year, spelling more trouble for the country’s giant housing sector as people lose faith in the market and pressure increases on struggling developers to complete presold apartments.
Amid reports that the government is preparing a bailout of the sector that could cost 300bn yuan ($44bn), experts at the rating agency S&P have concluded that the fall in sales will be twice as bad as they had originally forecast for this year.
“S&P Global Ratings now expects national property sales will fall 28%-33% this year,” the note said on Tuesday, “almost double the drop of our prior forecast.”
Last week’s news that disgruntled buyers of apartments at housing projects in more than 100 cities had banded together to withhold payments on unfinished homes has focused attention on the unfolding crisis.
The strike has ratcheted up the pressure on developers, who are already facing acute liquidity problems and who depend on customers paying upfront for homes off the plan to keep cash flowing through the business. The proceeds can be used to pay debts as well so the loss of this income will hit hard.
Some high-profile developers have already fallen into default, causing waves of panic in the global financial system – most notably Evergrande, the country’s second-biggest property firm which admitted last year that it could not pay part of its $300bn debt mountain.
Recent house sales data indicated that the steep falls in prices were evening out, but that was before news of the mortgage strike prompted a revision in forecasts. S&P thinks the contagion from weakening sales and loss of confidence could take down previously solid companies.
“This boycott on payments could easily spread to other
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