Asia Pacific ViewPoint - Chinese developers' debt may be investors' gain August 2018
Chinese developers’ mounting debt has made headlines in recent months, with listed domestic groups facing around US$110 billion of debt repayments between 2018-2021 while still remaining subject to restrictions on financial borrowing. Although there have yet to be any major default cases, many developers have been forced to delay the maturity date of their repayments, heightening concerns around credit risk.
While debt maturity remains a concern, CBRE Research believes the risk of a marketwide default is low. Major national developers are in healthy shape and alternative funding sources are in place. Nevertheless, the coming months are likely to see smaller developers come under increasing strain, which is likely to force some groups to sell projects to larger competitors and may stimulate some M&A activity.
This Viewpoint by CBRE Research examines credit risk in the Chinese real estate market and explains why developers’ debt may provide opportunities for selected investors.