Zhang Zhiwei, chief China economist at Nomura Holdings Inc has told Bloomberg, China’s property market may be reaching “Tipping Point”.
The China central government has been trying to cool rampant speculation in the property for some time. According to data from the government, prices of new homes declined in 16 of 70 cities in August from the month prior. Bloomberg cited data from the Beijing Times indicating land prices in Beijing fell 76 percent in August compared to the month earlier. In Guangzhou it fell 53 percent.
Shen Jianguang an economist with Mizuho Securities Asia Ltd told Bloomberg “sharp declines in property sales and prices are likely in the next two to three months,”
In another article, Bloomberg reports :
Chinese developers face an “increasingly severe” credit outlook, which may force them to cut prices and turn to costlier funding sources as sales weaken, Standard & Poor’s said.
A 30 percent decline in sales may leave many developers facing a liquidity squeeze, S&P said after conducting stress tests of the nation’s real estate companies. Most developers would be able to “absorb” a 10 percent sales drop next year, the credit rating company said.
“The worst isn’t over for China’s real estate developers,” S&P analysts led by Frank Lu wrote in a report today. “Developers are bracing themselves for slower sales and lower property prices ahead.”
But Real Estate is not the only problems facing china. Also laden with debt and experiencing a fresh global downturn in demand, bosses of manufacturing businesses are fleeing, leaving employees and debts of hundreds of million yuan behind. Wenzhou, in China’s east has seen seven local business owners flee.
One such owner on the run is He Fulin, who headed up the Zhejiang Center Group. With 3,000 employees, the group is one of China’s biggest eyeglasses manufacturers.
» Subprime crisis sweeps Wenzhou as bankrupt bosses flee – Shanghai Daily, 23rd September 2011.
» China’s Squeeze on Property Market Nearing ‘Tipping Point’ – Bloomberg Businessweek, 23rd September 2011.
» China’s Developers Facing ‘Increasingly Severe’ Credit Outlook, S&P Says – Bloomberg, 27th September 2011.
» Developers at risk if China home sales ease: S&P – Market Watch, 27th September 2011.