The coronavirus epidemic is accelerating a shakeout in China’s property sector as a cash crunch forces distressed developers to throw in the towel, reported Caixin.
With lockdowns across the world’s most-populous nation entering their third month, smaller home builders are being pushed to the brink because they can’t get enough money from pre-sales of apartments to cover their costs. In the first two months of this year, around 105 real estate firms issued bankruptcy filing statements, after almost 500 collapses in 2019.
“A vast number of mid- to small-sized developers will face a choice no one wants to make — either sell their property assets and start another business, or be bought out,” China Index Holdings Ltd. Research Director Huang Yu said. “The shakeout is just beginning.”
Even before the new coronavirus, China’s housing market was under pressure. Home prices rose at the slowest pace in almost two years in January and several developers, saddled with debt they’re struggling to service, had begun to dial back on construction. S&P Global Ratings said in a note Tuesday that as Covid-19 spreads, the squeeze may be felt most acutely by Chinese banks and property firms.