The rise and fall of Evergrande leaves scars on the real estate sector in China

It was the China Group Eversgrande It was removed from the Hong Kong Stock Exchange On Monday-a director came out by the former developer with a high aircraft, which was embodied in the economic rise of Beijing, and then symbolizes a statue of property in the country.

After its list in 2009, Evergrande became one of the most important shares of China, as the maximum market in the company reached 51 billion dollars in 2017. Trading in the company’s shares was suspended since January 2024 when it got a liquidation order, with the market value drop to 280 million dollars, according to LSEG data.

Evergrande, which was once the largest developer in China through sales, will now be remembered as the most developed in the world with more than 300 billion dollars of debt, whose shortening of a wider crisis has started years ago, and was affected by the country’s economic growth.

She was one of the first developers to stumble after Beijing raised its three red policy in 2021. This policy, which aims to brag against aggressive borrowing, sparked liquidity crisis across the sector.

The prices of new homes in China decreased at the fastest pace in eight months in June, and decreased by 3.2 % on an annual basis before recovering slightly to a decrease of 2.8 % in July, while a decrease in Real estate investment deepened.

“The property bubble in China reached its climax in 2021 and has been exploding since then,” said Andy Shi, an independent economist in Shanghai. He pointed out that the volume of new residential real estate sales has decreased by half over the four years. Prices also decreased by half in the smaller cities and the suburbs of the main cities and decreased by up to 30 % in the central areas of level cities 1, as indicated by the economist.

XIE added: “The amendment has not ended. But the economy has already absorbed most of the effects.”

“The correction of the housing market in China is still a continuous opposite wind, although we expect a lower decrease over the next few years,” said Zhangchon Hua, the chief economist in Greater China in KKR.

This effect on mitigating will continue to only 0.3 percentage points by 2027, according to HUA estimates.

in High -level policy meeting Last week, Chinese Prime Minister Lee Qiang stressed the need for more effective measures to address the real estate market and install market expectations. The property and construction sector in China It represents more than a quarter of GDP in China Before the Beijing campaign on the excessive debts of developers in 2020.

On Monday, the Shanghai government announced a large number of measures to enhance the demand for homes, including allowing families eligible to purchase unlimited number of homes in the outdoor suburbs and invite low mortgage rates. That followed similar reduction measures from The government of Beijing municipality Earlier this month, which removed the purchase restrictions from homes in the suburbs.

The shares of Chinese developers rose on Monday morning on the optimism that Beijing will continue with more stimulus to support the housing market, according to Lilim Wu, real estate analyst in Daiwa Capital Markets.

He urged Beijing Local governments to ensure the most rapid lending For developers who suffer from financial hardship It is said Looking at a plan to mobilize state -owned companies to take over the unauthorized homes of stalled developers as part of an attempt to stabilize the sector.

Although the risk of more backwardness to developers has calmed down, unification around the state -backed developers seems to be inevitable because the multi -year crisis has left the home buyer more careful than before.

“There is now a clear journey to safety, as the developers of the state -owned developers and the property are preferred to be over.

Brian McCarthy, director of Macrrolins, said that many of these great developers who are about to be “coma companies” will be eventually put forward to the state mechanism. The state’s entities are expected to come and finance the completion of incomplete units.

“The state -owned developers will end up in the entire industry administration. Political makers in China will not leave this bubble like anything like (what) we have seen over the past fifteen years,” he said.

Evergrande still has at least hundreds of incomplete projects throughout the country, as hundreds of thousands of home buyers are waiting for their homes, and a long period of creditors, from companies in China that provided materials to Evergrande to bond holders to recover their losses.

“For Evergrande, home delivery is still a priority.” Evergrande said it has handed over 1.2 million homes in the past four years, with More than 95 % of the sold unitsAccording to government media reports, quoting the company’s representative.

However, creditors continue to face uncertainties for payment. If its maritime entity in the liquidation process since last year, he added, but the huge wild Evergrande units are also difficult, which provides a little value of restructuring.

The liquidators said in Hong Kong in A. presentation Earlier this month, Evergrande’s debt was much larger than the estimated pregnancy and Any “comprehensive” restructuring will be far -reaching. Evergerland The debt stack reaches $ 45 billionToo higher than 27.5 billion dollars in the obligations that were revealed in the financial disclosure of Evergrande in 2022, The liquidat said.

Despite the liquidation efforts, bond holders and shareholders are likely to be largely eliminated. “For investors abroad who invest in China through Hong Kong, you have limited asylum to ground assets if things get off.”