Category Archives: Overseas Property

Chinese property giant in trouble?

Evergrande is reportedly the most indebted China-listed property firm.

China’s second-largest developer, Evergrande Real Estate Group, claims it can meet debt obligations despite Standard & Poor’s assessment that the company is now vulnerable to non-payment, after debt doubled in the past 12 months, reported Bloomberg.

According to data compiled by Bloomberg, the developer is now the most indebted of the 198 listed real estate firms in China.

Jimmy Fong, investor relations official at Evergrande, said the group will meet its near-term obligations after a property market pick up had improved liquidity.

However, there is still a 6.2 percent probability that Evergrande will miss payments in the next year, according to Bloomberg’s Default Risk model. The model tracks metrics including share performance, liabilities and cash flow.

“Default risk has risen as Evergrande leverages up aggressively to speed up construction and land acquisition, as well as expansion into non-property related businesses,” said Tony Chen, credit analyst at Nomura Holdings. “Refinancing needs are very heavy.”

There was a massive 90 percent jump in total debt at Evergrande in 2015, and Bloomberg reported that this total was 15 times what the company earned before interest, taxes, depreciation and amortisation. This figure happens to be more than double the industry median of 6.6 times.

Data also revealed that the Chinese developer has CNY159 billion of obligations due before the end of 2016, and CNY54.8 billion in the following year.

That led to Standard & Poor’s cutting Evergrande’s unsecured bond rating to CCC+ in April. This rating means it is vulnerable to non-payment and dependent on favourable business conditions.

Moody’s Investors Service also has concerns about the company, detailing in a report that the debt-fuelled expansion has weakened the developers’ credit quality despite the improved liquidity.

“We have CYN164 billion of cash on hand at the end of 2015 and we achieved CNY67 billion of contracted sales in the first quarter this year, which will reduce leverage,” Fong said. “Most of the debt due this year can be easily be rolled over.”

This article was first published on DDproperty.com, Thailand’s leading property site.

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New property cooling measures in major Chinese cities

Chinese authorities introduced new property cooling measures in Shanghai and Shenzhen last week, after residential prices in those first-tier cities skyrocketed in February, reported Reuters and Shanghai Daily.

Latest data released by the National Bureau of Statistics shows that property prices in Shanghai soared by 21 percent last month, while prices in Shenzhen surged by 57 percent on an annual basis.

As a result, city officials decided to implement more stringent curbs.

In Shanghai, buyers of second homes must pay a down payment of at least 50 percent for normal homes, and a minimum of 70 percent for non-normal homes. Previously, they only had to pay a 40 percent deposit for both types of properties.

Normal homes within the Inner Ring Road are categorized as being not bigger than 140 sqm and priced under 4.5 million yuan (S$948,191). Those situated between the Inner and Outer Ring roads should not exceed 3.1 million yuan (S$653,151), while those beyond the Outer Ring Road should cost less than 2.3 million yuan (S$484,600).

All other residential properties are considered non-normal.

Moreover, non-local residents are only allowed to buy a home if their income tax and social security documents show that they have resided in Shanghai for more than five straight years. Previously, they were permitted to purchase a residential property if they had lived in the city for at least two years cumulatively over a three-year period.

In Shenzhen, first-time buyers who have taken out housing loans in the past two years, as well as second-timers, now need to pay a 40 percent down payment. Previously, both groups only had to fork out a 30 percent down payment.

Furthermore, the residency requirement for non-local buyers was raised to three consecutive years from one year previously.