China’s property market has tumbled over the past two years after Beijing punished developers who depend too much on debt for growth.
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BEIJING — China needs to do more to fix its real estate problems, the International Monetary Fund said on Friday.
The property market contributes about a quarter of China’s GDP and is a drag on growth, especially since Beijing cracked down on developers’ overreliance on debt in 2020.
Chinese government start easing restrictions finance for the sector over the past few months.
“The administration’s recent policy measures are welcome, but in our view, more action is needed to end the property crisis,” said Thomas Helbling, deputy regional director for Europe. IMF Asia Pacific, said in a press conference.
“If you look at the measures, many of which deal with the financial problems for developers are still in relatively good financial standing, so that would be helpful,” he added in an interview with CNBC. “But the problems that property developers are having in severe financial difficulty remain unresolved. The problem of large unfinished housing in general remains unresolved.”
Apartments in China are often sold to homebuyers prior to completion. Covid and financial difficulties slow down the construction process to the point that Some homebuyers paused their mortgage payments last summer in protest.
Chinese authorities then emphasized the need to help developers complete the construction of previously sold apartments. However, residential floor space sold in China fell nearly 27% last year, while property investment fell 10%, according to official data.
“I thought it would be helpful to point out a way out and… how the refactoring could be done and who would suffer if there were any losses,” says Helbling. He also called for additional measures to tackle the large number of unfinished apartments.
“Otherwise, the sector will continue to decline and remain a risk, while limiting household exposure to the real estate sector and will be cash-strapped,” he said. and their savings, which will be an obstacle to a broader economic recovery.”
Helbling declined to give a specific time frame by which authorities need to act before the situation gets much worse.
“The sooner you address downside risks, the better.”
China says it’s not a crisis
The IMF analysis is part of its latest report on China, following annual discussions with Chinese officials that ended in November.
Officials pushed back on the IMF’s real estate review, according to a statement in the IMF report by Zhengxin Zhang, chief executive officer of the People’s Republic of China, and Xuefei Bai, senior adviser to the managing director. release, January 12.
The statement said China’s real estate market was generally smooth and “not in a state of ‘crisis'”, adding that the sector’s situation was a “natural evolution of the real estate market”. ‘debt relief and inventory cuts’ over the past few years.”
“The risks involved are local and only relevant to individual companies, and their impact on the rest of the world is relatively small,” said central bank representatives. In the near future, the Chinese side said it will work to ensure the handover of completed apartments and merge developers.
Chinese real estate developers like country garden, wait And R&F Attributes have seen their shares nearly double or more in the past 60 trading days — about three months, according to Wind Information. But trading in shares of one-time giants Evergrande, Shimao and Sunac has been halted since March 2022.
The IMF report indicates that a significant portion of investors in Chinese developers’ bonds have been affected.
As of November 2022, developers that have defaulted or are likely to default — with bond prices averaging 40% less than face value — represent 38% of the 2020 market share of companies, the report said. company has an existing bond valuation.
“The contraction of this sector has also led to tension in local governments. Falling land sales have reduced their financial viability at the same time as the financial means of local government (LGFV). also significantly increase the amount of land purchase.”
IMF on Monday raised global growth expectations for the year due to better-than-expected growth in major countries late last year, softening of inflationary pressures and the end of China’s Covid control measures.
The new 2.9% forecast for the world is 0.2 percentage points higher than the October forecast. But that’s still a decline from 3.4% growth in 2022.
For China, the IMF forecasts growth of 5.2% this year, faster than 3% in 2022.
— Silvia Amaro of CNBC contributed to this report.
