China’s real estate crisis continues, with weak data released for November. Investment and construction activity are all down, while prices are being cut as developers compete for revenue. Despite moves to calm markets, more developers are approaching bankruptcy, Kallanish notes.
Investment over January-November was up 6% at CNY 13.731 trillion ($2.157 trillion), according to the National Bureau of Statistics (NBS), but that left November investment down 4.3% year-on-year at CNY 1.238 trillion. That is the third straight month of y-o-y declines. Real estate sales were up 4.8% at 1.581 billion square metres over 11 months, but November sales were down 14% at 150.9m sqm. This was an improvement from October, and credit data also shows mortgage issuance increased last month.
This was due to an easing of restrictions on lending to the sector as the government manages a debt crisis among certain companies. It wants to pressure companies to sell assets and land relatively safe bankruptcies, without crashing the whole sector and causing a wider crisis.
Evergrande has been the centre of attention due to its $300 billion plus debts. It is now officially a defaulter and is widely expected to be steadily wound up as a business. Local government work teams have been sent to the company to ensure revenue raised by asset sales goes to the right creditors and to work towards an official bankruptcy.
Developers across the board are being forced to compete for revenue, however, and this has forced prices lower. In its survey of 70 cities, NBS now records prices falling m-o-m in 63 of them, the most widespread decline since February 2015. NBS data also shows that average real estate prices fell for the fourth consecutive month to CNY 9,597/sqm, the lowest level since April 2020.
The impact on the steel sector has been dramatic, with Chinese steel demand seeing a step-change lower in the second half as China began moving more aggressively against developers. This is also expected to drag Chinese steel demand lower in 2022. Kallanish’s China Steel Intelligence expects apparent steel demand in 2022 to be down 3.4% at around 913 million tonnes.
