China’s property market is struggling.
Country Garden Holdings, ranked for years as China’s top real estate developer by contracted sales, reported a 96 percent drop in first-half profits, the Wall Street Journal reported. And the company’s home sales are down by one third versus the previous year.
Anemic demand, lowered expectations and declining property values, have contributed to the struggling market, the Guangdong-based company told the outlet. “All these exert mounting pressure on all participants in the property market, which has slid rapidly into severe depression.”
A resurgence of Covid-19 in cities across China has also slowed construction on projects due to strict lockdowns.
Country Garden, which is considered one of the country’s financially strongest developers, tallied a profit of $89 million during the first six months of 2022. That’s down considerably from the $2.2 billion it raked in during the same time period in 2021.
More than 30 Chinese real estate companies, including China Evergrande Group and Sunac China Holdings, have defaulted on their international debts and privately run developers have issued profit warnings.
The depressed property market is also impacting other Chinese sectors like the privately run banks and state-owned asset managers.
Debt managers China Cinda Asset Management and China Huarong Asset Management, reported losses during the first half of the year. Cinda reported a 33 percent dip in profits and Huarong reported a $2.7 billion net loss.
Country Garden chairman Mo Bin apologized to investors for the sharp profit drop during an earnings call and said the company would continue to adjust its strategies to focus on balancing its cash flow.
The company also suggested that despite a depression, it believes China’s economy is resilient and urbanization in the country has positioned it for long-term growth.
— Victoria Pruitt