China developers: hard pressed, not yet distressed
Bargain Chinese property projects will be up for grabs in coming months as developers scramble to survive falling home sales and a funding crunch.
But circling foreign funds can no longer expect a big firesale as the government eases its tough steps to cool the market, fearing mass bankruptcies and a property price slide that would send a shiver through the economy.
When Beijing upped the ante in a fight against property speculation at the end of last year by ruling that buyers of second homes must pay 40 percent in equity, apartment sales and prices slid in the southern cities of Guangzhou and Shenzhen.
Developers, already squeezed by a land appreciation tax and a clampdown on bank lending, then found that capital market turmoil closed off share and debt issuance.
Some fund managers believed their time had come, and cheap deals would open up a Chinese property market where a yearly influx of 8 million people into cities promises long-term riches faxless payday loan.
They are still waiting.
“We expected there to be a lot more guys going under and a lot more forced sale situations,” said Chris Gradel, managing partner at Pacific Alliance, which manages about $4.5 billion in alternative asset funds targeted at China and Vietnam.
Describing the resilience of Chinese developers as “one of the biggest surprises of the year”, Gradel said property firms had muddled through with presales, delayed payments to contractors, and borrowing from banks and other sources.
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