Feb 17, 2020 (China Knowledge) - Epidemic outbreak’s impact slowed real estate’ sales and taking further toll in Feb, may result in government aggressive supportive policies to alleviate situation. On contrary, land auctions remain aggressive – developers show confidence in rapid market recovery.
Last week, China’s real estate sector ranked fourth among 28 industries in the equity market, up staggering 7.51%; with 115 real estate companies’ shares rose, only 12 fell. Over in HKEx, the sector rose 2.44%, with 71 property counters rose, while 27 fell. These prices depict the sector seems to immune from the epidemic fears where real estate companies’ across the country remained closed since a quarantine set in to bar human interaction to curb the spread of coronavirus.
But the true pictures of the negative side are not be neglected, the coronavirus, indeed, is wreaking havoc on the Chinese economy in short term, with plunged home sales. Even before the outbreak, housing was already on the back foot under government’s strict policy to crack down speculation and curb runaway price growth. As can be seen from the twenty-two SZSE/ SSE/ HKEx-listed large real estate companies we have been following, the Gross Floor Area (GFA) sold in Jan 2020 has dwindled with 13 companies reported negative YoY. Since Jan was the traditional real estate off-season, enterprises usually focus on seizing sales in Feb and Mar. However, due to the epidemic, many sales offices and construction sites were closed, suppressing Jan’s market turnover and eventually slowing down Q1’s sales growth. As a result, many real estate enterprises have adopted online sales to cope with the challenge.
For those developers with high net debt ratio and low reserve liquidity, the coronavirus outbreak may lead to further impact on companies’ liquidity and higher debt repayment pressure in the short run. Some enterprises will be forced to downsize or even go bankrupt. But such expected situation will prompt the government to offer financial supports and other creative solutions that may come out from Beijing.
However, to alleviate the dwindling property sales, extreme measures taken by the government to fight the epidemic outbreak, many cities in China, including Wuxi, Shanghai, Xi'an, Hangzhou, Tianjin, Nanchang and Nanjing, have come up with supportive policies tackling resumption of work and business. These include rent and tax reduction, loosening of property’s pre-sale requirement and granting of bank credit to real estate and construction companies. Among them, developers are allowed to pay for bid lands at later date or by installment.
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