Shenzhen eases housing rules for builders to avert liquidity crunch as home sales crash amid viral outbreak
- Shenzhen to allow develop reopen their showrooms to prospective buyers in a move to help builders boost sales, cash flow
- Developers can also apply to get no more than 20 per cent of their pre-sale funds from banks, the Housing and Construction Bureau says
Shenzhen is rushing new measures to help the city’s developers avert a liquidity crisis amid the coronavirus outbreak, helping to soften the blow to new home sales the past two months.
The Housing and Construction Bureau said home projects with pre-sale certificates can reopen their showrooms to prospective buyers, easing the restrictions imposed since late January to contain the viral outbreak, according to a statement issued on Wednesday. It is also easing other rules relating to project financing requirements.
The move underscores the concerns among city’s officials that the curb on people’s movement, and other existing measures to douse price speculation since last year, are pushing its home builders to the brink of financial troubles. Sales among mainland China’s top 100 developers fell 38 per cent in February to their lowest level in years, according to China Real Estate Information Corp.
“The government wants to boost the liquidity of home builders, ease their cash flow pressure to help them power through the current difficult times,” said Ray Wu, Head of Investment at Savills’ Investment Shenzhen.
The market in Shenzhen came to near a standstill in February with sales of new homes falling to 839 units last month from 2,813 in January and 4,861 in December, according to data compiled by Hong Kong brokerage Midland Realty. That is a stark contrast to the reported boom through late last year, after Beijing earmarked the “Silicon Valley of China” as a new special economic zone in August.
Developers have had to shut their showrooms since January, choking cash flow and deepening the slowdown in the broader Chinese economy. Analysts have said that the buzz created from the creation of Greater Bay Area plan is unlikely to be repeated when a lockdown in some cities eventually lifts.
China Evergrande has slashed its prices by a quarter through this month in the biggest sale nationwide, prompting rivals like Wharf (Holdings) to earn of a brewing price war as developers turn desperate for cash flow.
More than 100 property firms have filed for bankruptcies in the first two months this year, the state-owned People’s Court Daily said on its website, outpacing the rate in 2019 when a total of 500 builders collapsed.
In Wednesday’s statement, the Bureau also said builders of new homes can apply for pre-sale approval without having to show the necessary funding thresholds for their projects, it added. Under the city’s regulations, developers are required to deposit 2 per cent of the estimated total investment of the project before they can market their projects to home buyers.
“Developers can also apply to get no more than 20 per cent of their pre-sale funds from banks,” it said in the statement.Payments by home buyers for home projects under construction are locked up in banks, with developers only allowed to dip into the pool -- its crucial cash flow -- based on the status of progress in the construction.