Dedicated locality research platform
Dedicated locality research platform
Enter your email address and you will receive
a link to reset your password
.png)
China Vanke, a prominent Chinese state-backed property developer based in Shenzhen, is facing challenges in its financial performance due to the ongoing market downturn in China's real estate sector. Despite being regarded as financially stable, the company reported a significant 19.4% decrease in net profit for the first six months of this year, amounting to 9.9 billion yuan (approximately $1.36 billion).
The company acknowledged that its profitability would remain under pressure in the short term due to the current market correction. However, it emphasized that this would not negatively impact its cash flow. China's real estate market plays a substantial role in the country's economy, accounting for about a quarter of its GDP.
China's real estate market is currently grappling with a debt crisis that has caused concerns in global financial markets. This crisis has raised fears of potential contagion within the financial system, occurring simultaneously with China's broader economic slowdown.
In response to the challenging market conditions, China Vanke has adjusted its investment strategy. The company has significantly slowed down its investments, allocating only 28% of its sales revenue to the purchase of new land during the first eight months of 2023. This is a notable decrease from the 40% allocation during more favourable market conditions.
Despite the market challenges, China Vanke highlighted the continued smooth operation of its financing channels, which include bond issuances and bank loans. The company also successfully completed offshore refinancing worth 15 billion yuan in the first half of the year. Additionally, it is preparing to repay three bonds with a total value of 11 billion yuan, which will mature next year. To manage its risk exposure, the company plans to reduce its offshore debt in response to rising U.S. dollar interest rates.
As pressure continues to mount on the real estate market, more Chinese cities are taking steps to ease mortgage curbs. This is aimed at revitalizing consumer demand for homes. For instance, Wuhan, the capital of Hubei province, announced that it would allow individuals to access preferential loans for first-home purchases, regardless of their credit history, starting from September 1. This move follows similar measures taken by major cities like Shenzhen and Guangzhou, which have also relaxed mortgage rules in a bid to stimulate the housing market.
Propscience is India’s dedicated property news portal. We cover the latest events, news, trends, deals, new launches and more.
All our services and tools are completely free of cost and available 24X7!
