A Hardline Approach to Property

Beijing’s new tightening measures against the property sector have been enforced more strictly than initial expectations, with developers facing a three-year deadline to comply with key balance sheet requirements. In addition, regulators appear wise to developers’ typical accounting tricks and have forbidden certain measures to avoid rising debt levels.

The property sector is now a meaningful threat to China’s post-COVID recovery. Land sales have declined by larger margins already, and property sales growth may be negative in October. September residential housing sales outpaced new starts for the first time in two years. Another property destocking cycle similar to what took place in 2014 and 2015 would significantly slow construction momentum, commodity demand, and growth.

Posted November 17, 2020
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