China’s real estate sector has been lurching from one crisis to another since 2020, when Beijing started cracking down on excessive borrowing by developers in a bid to rein in their high debt and curb runaway housing prices.
Founded by entrepreneur Hui Wing Mau in 2001, Shimao develops large-scale residential projects and hotels across the country. It owns Shanghai Shimao International Plaza, one of the tallest skyscrapers located in the heart of Shanghai.
In March, the company estimated that its 2021 net profit had plunged about 62% from a year earlier, mainly because of the “harsh” environment facing the property sector. It then delayed the release of its 2021 results, citing the lockdowns in Shanghai.
“Due to the significant changes to the macro environment of the property sector in China since the second half of 2021 and the impact of Covid-19, the Group has experienced a noticeable decline in its contracted sales in recent months, which is expected to continue in the near term until the property sector in China stabilizes,” Shimao said in the filing on Sunday.
The company added that it has been trying to reach “amicable resolutions” with creditors on its failure to make principal payments on other offshore debt. In the absence of an agreement, creditors could force the company to accelerate repayments.
The industry’s problems have been exacerbated by Beijing’s zero-Covid policy and slowing economy. China placed many of its major cities — including Shanghai — under strict lockdown earlier this year to fight rising Covid cases, hitting business activity severely.
On Friday, a survey by China Index Academy — a property research firm — showed that prices for new homes in 100 cities plunged more than 40% in the first half of this year, compared with the same period last year.
Although there are signs that sales declined less dramatically in June than previous months, the road to the property sector’s recovery will likely be “quite bumpy,” as Beijing remains committed to its zero-Covid approach, said Nomura analysts in a note on Monday.
#Chinas #real #estate #crisis #deepens #big #Shanghai #developer #defaults