China Home Prices Weaken as Evergrande Weighs on Property Sector

Real estate values in China dropped by 20 percent in August from last year as crackdowns on the property sector coincide with property giant Evergrande’s debt crisis.

Average prices of new houses in 70 major Chinese cities grew by 0.16 percent from July to August — its slowest pace in eight months — according to a Bloomberg estimate on National Bureau of Statistics data released on Sep. 15.

Rating agency Moody’s estimated that China’s nationwide property sales will decline by up to 5 percent in the next six to 12 months as regulations tighten funding access for developers.

The Chinese property sector has been under heavy scrutiny as President Xi Jinping pursues “common prosperity” for China, declaring that houses were for “living in and not for speculation”.

China Evergrande Group, one of China’s top-three developers at the verge of defaulting on its $300 billion debt, also exposes numerous sectors to significant credit risks.

“We believe a default would reinforce credit polarization among homebuilders and could result in headwinds for some smaller banks,” Fitch Ratings said in a statement.

Rating agencies have recently slashed Evergrande’s credit ratings, citing high levels of liquidity risk and that the company is unlikely to refinance.

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