Property Bonds Plunge Most Since 2008 on Curbs: China Credit
Authorities have ordered more than 20 trust companies to stop financing real estate projects, Guangzhou Daily reported on July 28. Reuters reported Sept. 22 the banking regulator ordered trust companies to report their dealings with Chinese property developer Greentown China Holdings Ltd.
Agile Property Holdings Ltd., Shimao Property Holdings Ltd., Country Garden Holdings Co., Guangzhou R&F Properties, China Central Real Estate Ltd., and Yuzhou Properties Co. have all borrowed from trust companies in 2011, Nomura Holdings Inc. analysts said in a Sept. 22 research note.
Chinese property companies access to bank loans has been effectively halted since November 2010, Shen Jianguang, an economist at Mizuho Securities Asia Ltd. in Hong Kong, wrote in a Sept. 22 note.
“The increasing liquidity pressure will force developers to cut prices, in order to increase sales and bring in more sustainable cash flow,” Shen wrote. “This process should have been started by the developers some time ago, instead of resisting price cuts and turning to various costly financing channels.”
“Getting mortgages used to be as easy as rolling out of bed,” he said. “People are having a harder time.”
China's measures to control its property market are at a critical stage and the nation needs to focus efforts on curbing price increases in less affluent cities after limiting home purchases in metropolitan areas including Beijing and Shanghai, Premier Wen Jiabao said on Sept. 1. Only two cities responded to the government's July call for added restrictions on housing purchases.