China property developers pull down shutters, hoard cash

Wed Sep 18, 2013 10:14pm EDT
 
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By Umesh Desai and Yimou Lee

HONG KONG (Reuters) - China's biggest property developers are sitting on $25 billion in cash as they prepare for a possible credit crunch and another round of crackdowns on real estate speculation.

Companies including Shimao Property Holdings Ltd 0813.HK and Greentown China Holdings Ltd 3900.HK raised more than $16 billion in offshore bonds and loans over the first eight months of 2013 - about 36 percent more than in all of 2012. But they have turned more cautious about investing, leaving much of that money on their balance sheets.

China's property sector is a pillar of growth in the world's second biggest economy, accounting for 15 percent of the gross domestic product in the first half of the year. China data released on Wednesday showed new home prices in August rose at the fastest pace in 2-1/2 years strengthening the case for government cooling measures.

Reuters has analyzed data on 76 Chinese property developers that reported June-quarter results, and found that while their cash and short-term investments spiked, their capital spending plans were more conservative.

Thomson Reuters StarMine SmartEstimate data shows China's real estate management and development companies' total capital expenditures are expected to fall 11 percent in the next 12 months, a sharp contrast with property peers in the broader Asia-Pacific region where capex is forecast to rise 6.6 percent.

Developers have curtailed capital spending as the U.S. Federal Reserve's widely expected tapering of bond purchases drives up global interest rates. At the same time, Beijing's renewed crackdown on the country's bubble-prone property market threatens to curb demand, while some cash-starved smaller developers could go bust, flooding the market with cheap property.

"Our financial situation is quite healthy, but we do have concerns for a credit crunch in the industry. The concern does exist for us. We solved our problems already and we are at a very stable situation, but other companies' problems will indirectly affect us - it's all interconnected," said Greentown China Holdings Chief Financial Officer Fung Ching Simon.

"That's why we don't have a very aggressive plan for our sales target for the year."   Continued...

 
A man talks on his mobile phone as he walks past an advertising billboard outside the Greentown residential construction site in Hangzhou, Zhejiang province in this September 23, 2011 file photo. REUTERS/Steven Shi/Files