Country Garden reports major slump in China home sales, triggering fresh alarm for creditors amid debt restructuring

Country Garden Holdings said home sales plunged last month to a multi-year low, raising fresh alarm about its financial distress even as the mainland Chinese developer fends off hostile creditors in Hong Kong and seeks forbearance on more than US$10 billion in offshore debt.

The firm, once China’s biggest home builder by sales, reported 3.72 billion yuan (US$516.8 million) in contracted sales for February, an 85 per cent slump from a year earlier, it said in a Hong Kong stock exchange filing late on Monday. Sales fell 32 per cent from 5.49 billion yuan in January.

The February slump is the steepest in at least five years, and amounted to about a tenth of Country Garden’s average monthly sales of 35 billion yuan over the past four years, according to its filing records.

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Boom, bust and borrow: Has China’s housing market tanked?

Boom, bust and borrow: Has China’s housing market tanked?

China Evergrande Group, the emblem of China’s housing market crisis, lost a case in Hong Kong in January when the High Court ordered the firm to liquidate after accumulating more than US$300 billion in total liabilities. Investors are likely to get next to nothing on the firm’s US$20 billion of defaulted offshore bonds.

Home sales in mainland China remained anaemic despite recent measures by Chinese authorities to extend financial lifelines to a “whitelist” of worthy developers, indicating a lack of confidence among consumers. Sales by the country’s top 100 developers fell at an annual rate of 60 per cent in February, according to China Real Estate Information Corp.

“We doubt that the government’s new whitelists will stabilise China’s property market,” analysts at Absolute Strategy Research said in a note. “A blanket guarantee to ensure the delivery of all presales may eventually be required.”

Country Garden, which is based in Foshan in southern Guangdong province, said generating cash flow remains its “top priority” and efforts will be made to ensure home delivery, according to a statement on its official WeChat social media account. The firm delivered more than 600,000 units last year, and has targeted 480,000 this year, it added.

Chairperson Yang Huiyan, one of China’s richest women, said the builder can deliver its 2024 target based on its current resources, the statement added, citing an internal company discussion on Monday. Still, the company needs “to cherish its resources while waiting for the property market to recover, she added.

As of Sunday, Country Garden said 217 of its public housing estates have been included in the “whitelist” of projects that qualify for funding support from Chinese authorities and financial institutions. That will be a boost to its efforts to deliver homes and revitalise its asset values, it added.

Country Garden shares fell more than 5 per cent to HK$0.56 in morning trading.