Chinese Developer Forced To Sell

Market Insights
9 years ago
2 minutes

One of China's largest and most heavily indebted home builders, Evergrande Real Estate Group — controlled by the colourful billionaire Xu Jiayin who has been ordered by Treasurer Joe Hockey to sell his $39 million Point Piper mansion Villa del Mare — has received a lifeline of more than $US16 billion from Chinese banks. The New York Times reports that Evergrande’s debt reached about $US24 billion by the end of June, plus another $US7 billion in perpetual bonds marked as equity.

According to analysts cited in the article, the billion-dollar lifeline is only a short-term solution as China’s housing market continues its downward spiral. As prices fall and housing units remain empty, real estate developers are having trouble paying back debt.

"The Chinese leadership is concerned about the health of the country’s property market because it is so deeply interconnected with other parts of the economy," the article states. "Real estate is an important driver of steel consumption, loan growth and jobs for sales agents and migrant construction workers. A drop in home prices hurts ordinary Chinese because they tend to invest a disproportionate amount of their savings in real estate."

Today, China is set to publish a monthly survey of residential property price trends in 70 major cities. Data released last week showed that new housing starts, measured by floor space, fell 20 percent in the first two months of the year compared with a year earlier, while new land purchases by developers fell 32 percent.

Xu is reportedly the fifteenth richest man in China. He founded Evergrande in 1996, and is now its chairman and majority shareholder. The firm began building in the city of Guangzhou in southern China but has expanded nationally to more than 100 cities. Earlier this month, Hockey ordered that Villa del Mare, which was acquired by Evergrande through a string of shell companies, be sold within 90 days.


**originally published on www.therealestateconversation.com.au**