The value of Chinese real estate enterprises decreased by 90 billion USD

Chinese property developers have lost at least $90 billion in stocks and bonds due to the bursting housing bubble and debt crisis.

Specifically, since the beginning of the year, the value of shares of companies has evaporated about $ 55 billion, according to Bloomberg Intelligence. Along with that, the value of bonds has also fallen by more than $35 billion, according to calculations by the Bloomberg Bond Index.

The slide has pushed shares of Chinese property developers to lows not seen in a decade and junk bonds to record lows.

The industry's outlook was further pessimistic after Beijing signaled it was prioritizing helping homebuyers over businesses, in efforts to stabilize the property market. In the long run, an aging population and a shift in policy could drag on the boom era of the sector.

The performance of an index that tracks Chinese real estate stock prices over the past decade.

"The aim of the measures is to save the property market and the confidence of households, not developers. Since significant policy changes are unlikely, the golden age of corporate growth is unlikely. Developers' quick revenue and high leverage are probably over," said Gary Ng, Senior Economist at Natixis SA.

So far, government support measures have included asking banks to loosen lending capacity and launching a rescue fund, but progress has been slow. Instead, the authorities seem preoccupied with appeasing homebuyers who are disgruntled by delayed projects.

After hitting a decade low earlier this week, Bloomberg Intelligence's gauge of Chinese property shares is down 27% this year, after falling 34% in 2021. in stark contrast to the annual increase of more than 80% at the turn of the century.

A project under construction in Shanghai. Photo: Bloomberg

In the USD bond market, the situation is even worse. The country's businesses have defaulted on a record $28.8 billion in bonds this year, nearly all of them real estate businesses.

The average dollar-denominated bond price of Chinese real estate companies was 16 cents, compared with 40 cents in March, Bloomberg Intelligence estimated at the end of July. This price reflects low expectations among investors. private.

As economic and population growth slows, China's property market is likely to face a glut in the coming years. The leadership's view that housing is for living, not speculation, as well as the campaign to increase the provision of social housing, make real estate unlikely to be a highly profitable business anymore.

"In the long term, there will be a change in the real estate business model. This industry may be more state-dominated, so property prices can be controlled. This is consistent with China's goal of social stability and eradication of social inequality," forecast Andrew Chan, Credit Analyst at Bloomberg Intelligence.

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