The coronavirus pandemic has devastated an already weakened residential real estate sector in China.
More than 100 real estate firms active in China filed for bankruptcy in the first two months of the year, according to Bloomberg. Smaller firms are taking the biggest hit, said China Index Holdings Ltd. Research Director Huang Yu.
“A vast number of mid- to small-sized developers will face a choice no one wants to make — either sell their property assets and start another business, or be bought out,” Yu said, according to Bloomberg.
Yu expects that the wave of bankruptcies will result in a consolidation of real estate companies in the country because of mergers and acquisitions. Fusheng Group Co., based in the southeast of the country, has become one of the first mid-size companies to falter and sell a controlling stake to a larger company.
Rental management companies and short-term rental companies are among those under immense pressure from containment policies and reduced travel.
Standard & Poor’s is projecting that new home sales in China will drop for the first time in 12 years this year. Sales could be down between 15 percent and 20 percent depending how the next month or so shakes out.
The crisis in China is taking its toll stateside. U.S. construction firms are also feeling the effects of the crisis in China, which supplies about 30 percent of the country’s materials. Contractors are having trouble sourcing materials domestically and are slowed by shipping delays, meaning projects are slowing down.