Is it possible that the real estate market will decline? There are troubling signals especially from China. After a significant fall in the shares of Country Garden Holdings (a large Chinese real estate company that lost its 17.4% of its value On the Hong Kong Stock Exchange, there is an impact on the Hang Seng index), there is a risk that its effects will spread to the Chinese property market and could have global ramifications.
The plunge in shares was accompanied by news of suspension of trading on about ten of its domestic bonds, which have a total value of Rs. 16 billion yuan (equivalent to $2.2 billion). The collapse of Country Garden represents an alarm bell for the stability of the Chinese economy, as the real estate sector is one of the fundamental pillars of the national economic system (contributing to a third of Chinese GDP).
The collapse of the Chinese real estate giant: global risks
Country Garden has tried unsuccessfully to reassure investors and bondholders, announcing it is considering various debt management strategies to protect its long-term growth, Republica reports. The company has stated its intention to proceed “disposing of” some of its assets, Start with those that are not performing well, such as hotels and office buildings. In parallel, it will undertake “strengthening internal controls” to reduce administrative and operating expenses, thereby improving the efficiency of its operations.
There is a danger in case of collapse of the country garden impact on the real estate market European. Several indications seem to support this possibility, partly related to higher interest rates that have pushed up the cost of borrowing.
The current situation highlights the challenges China is facing in managing the real estate debt crisis, which has led to unprecedented defaults, triggered protests among property buyers and trust companies for projects in the real estate sector. have raised new concerns about the risk of
Can the Chinese crisis reach here too?
Analysts say there is an environment of uncertainty in the European commercial real estate sector. Of particular concern is the growing reliance on financing from non-bank lenders, also known as “Shadow Bank”. These lenders have filled a gap created by a slowdown in funding from traditional banks, which are subject to increased regulation. Matthew Pointon, senior real estate economist at Capital Economics, underscored the concern about this situation.
Interestingly, a few months ago, before the global financial crisis, traditional European banks used to give loans as high as 80% of a building’s value, whereas currently They rarely exceed 60%. This data highlights changes in the financial landscape and contributes to maintaining an environment of uncertainty in the region.
Apart from Country Garden, there have been other worrying incidents, such as those related to Evergreenwho have to face 300 billion dollars in debt. These large-scale collapses fuel fears of a contagion effect that could include home buyers and national banking institutions. This scenario, as reported by Ansa, could further damage the recovery prospects of the real estate sector and impact China, which is already grappling with deflationary risks.