Chinese property developers' cash flows have plunged by more than 20%
Chinese property developers' cash flows have plunged by more than 20%
Abstract
The drop comes as credit demand in China missed expectations in July, and property developers' struggles drag on. While investors have turned cautious on Chinese property companies, developers now face the risk of losing another important source of cash flow: homebuyer pre-payments. "The crux of the problem is that property developers have insufficient cash flows - whether because of debt-servicing costs, low housing sales, or misuse of funds - to continue with projects," Wu said in a report last week. While the PBOC may hope the cut could ease some of homebuyers' burden and help developers get loans, the problem isn't just about funding, said Bruce Pang, chief economist and head of research for Greater China at JLL. He noted how developers have found it harder to obtain funding on their own, and have had to rely more on pre-sales to homebuyers. Despite multiple reports of government plans to keep developers funded, the central government has yet to officially announce broader support for real estate. Investment funds have largely stayed away from Chinese property developers, reducing a potential source of funding. "What has been worrying has been the lack of willingness and speed by top policymakers in resolving real estate developer's funding issues," Carol Lye, assistant portfolio manager at Brandywine Global, said in an emailed response to CNBC. Lye said the investment management firm's allocation to China real estate is low, and that Brandywine holds "High quality real estate bonds that have been given preference in terms of government support." Some investors have even turned to companies in other parts of Asia.