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July 17, 2017

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Chinese developers head overseas to raise funds

CHINESE real estate firms have turned to the overseas market to seek financing as tougher regulations have made it more difficult for them to raise funds at home.

At least five property companies have announced moves to issue notes or bonds, worth more than US$2 billion in total, in the overseas market since the beginning of July, according to latest statistics from Centaline Property Research Center.

They include Greentown China and Longfor Properties, both major property developers in the country.

Greentown China said earlier this week it would issue US$450 million of senior perpetual capital securities, with the net proceeds to be used to refinance existing debt and for general working capital purposes.

Longfor Properties said early this month it would issue US$450 million of senior notes due in 2020 and use the proceeds for refinancing only.

The moves came as domestic financing by real estate developers shrank, following tightened market regulation aimed at curbing asset bubbles and preventing financial risks.

Property firms raised 177.2 billion yuan (US$26.1 billion) through bond and note issuance in the first half of 2017, a 74-percent plunge year on year, Centaline Property said.

“Authorities have strengthened control over various sources of funding for developers,” said Le Jiadong, analyst at GF Securities. “Major financing channels have been narrowed across the board.”

Meanwhile, the cooling housing market means less contribution from home sales to the companies’ cash flow.

Property sales had surged over two years of pro-growth policies before authorities moved to rein in speculation in the second half of last year.

Of 70 large- and medium-sized cities surveyed in May, new home prices fell or rose more slowly month on month in 35 of them, up from 31 in April, the National Bureau of Statistics said.

An indication of weaker sales, real estate loans took up 35 percent of all new loans extended by Chinese banks in the first half, down from 44.9 percent in 2016, central bank data showed.


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