The Chinese housing boom could be coming to an end as stricter lending rules take place and debts come due in the country.
Maturing yuan bonds for developers will rise in volume by 64 percent in 2018 and by another 87 percent the following year, and several bondholders can start demanding early repayment next year. This could lead to several asset sales and developers not having enough cash to start new projects, according to the Wall Street Journal.
Any slowdown in China’s housing sector could have major implications for its economy, as real estate makes up almost one-third of the country’s growth.
Policymakers had tried to restrict home sales recently to avoid problems of an overheated market, but there are now worries that they may have gone too far and are slowing down the market more than they had anticipated. Regulations meant to cool down the market have included putting caps on the prices of new home sales and limits on yuan bond sale.
China has made moves to address these concerns. For instance, the large development company China Evergrande Group said it would reduce its net debt ratio from 270 percent to 70 percent by 2020, and a state-assets regulator in the Hubei province has told state-owned enterprises to speed up construction and sales. [WSJ] – Eddie Small