Real eState

China’s Evergrande reports $81 billion in losses amid real estate woes

Published

1 year ago

July 18, 2023

Chinese real estate developer Evergrande has disclosed losses of $81 billion over 2021 and 2022, underscoring how its massive debts remain a serious concern for the financial health of the Chinese property sector — and the world’s second-largest economy overall.

China’s post-pandemic recovery is threatened by the sluggish real estate sector, which is still responsible for a quarter of the economy’s growth.

As one of China’s largest builders of apartments, Evergrande slid rapidly into financial distress in late 2021, causing alarm around the world as some analysts feared a collapse that could be China’s “Lehman moment” — and the start of another financial crisis.

Evergrande’s $300 billion cash crunch is deepened by demolition order

Instead off letting the company implode under a $300 billion pile of debt, Chinese authorities opted for what analysts called a “controlled demolition” — essentially managing the corporation through a gradual collapse. Since then, the company has continued to limp on, posing a continual headache for the policymakers who are trying to restore confidence in the real estate sector.

The group finally came clean about the extent of its near-fatal cash crunch and the slow progress it has made toward resolving its financial difficulties when it released a repeatedly delayed earnings report late on Monday local time.

Aside from the $81 billion in losses, Evergrande’s total liabilities continued to grow in 2022, reaching $335 billion compared with just $251 billion in assets, according to the earnings statement.

That disclosure underscored the Chinese government’s tricky effort to tackle real estate debt without bursting a possible property bubble, as it tries to ensure a tepid post-pandemic recovery doesn’t get knocked off track by a worsening real estate slump.

The Chinese economy missed expectations to grow by 6.3 percent year over year in the second quarter, according to data released on Monday. That slower than expected recovery is in part caused by falling property investment, which was down 20.6 percent in June, according to Reuters.

Lingering uncertainty over Evergrande’s fate reflects the poor state of the sector — and threatens to worsen it, analysts warn.

“Evergrande’s insolvency, beyond its own liquidity coming to a standstill, is also related to the cooling of housing sales” and the increased pressure for indebted property developers to finish projects, Xie Yifeng, president of the China Urban Real Estate Research Institute, told state-run Beijing Business Today. “It’s a vicious cycle.”

The continued insolvency means that “simple debt restructuring may be unable to save Evergrande,” Chen Xin, a finance professor at Shanghai Jiao Tong University, wrote on Weibo, China’s answer to Twitter. The situation is “tantamount to disaster” for the company’s creditors, Chen added.

Surging demand for homes and government reliance on land sales for income meant that developers like Evergrande had easy access to bank loans and could aggressively expand using a borrow-to-build model throughout the 1990s and 2000s.

But the government soon became wary of ballooning debt that might cause defaults, and regulators severely limited borrowing in 2020. Evergrande was left on the verge of collapse, in a crisis that many saw as marking the end for China’s housing boom.

Reduced access to loans has left property developers struggling to finish apartments, hurting buyer confidence and dragging down sales. Floor area bought in June fell by 28 percent compared with the same period a year before, official data released on Monday showed.

That slump extends a dilemma for Chinese policymakers, who are torn between stimulus measures to revive confidence and determination to defuse financial risks that could ultimately do more damage to the economy.

So far, however, Evergrande has neither collapsed nor significantly improved its financial situation.

Most of the $81 billion net losses disclosed on Monday was accumulated in 2021, resulting in a crisis and promises to restructure at the end of that year. But even last year, it still reported nearly $15 billion in net losses, underscoring how the company has struggled to substantially resolve its insolvency problems.

In another sign of the group’s uncertain financial future, Evergrande’s external auditor, Prism, said it could not comment on the financial statements because it was unable to obtain sufficient evidence regarding the group’s ability to meet its obligations.

Hong Kong-traded shares in Evergrande have been suspended since March 2022, meaning the company is just two months away from being delisted from the stock exchange.

Evergrande also said on Monday that it will meet with its overseas creditors this month to try to reach a deal on debt restructuring.

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

Published

3 days ago

November 6, 2024

Anne Joseph

TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

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Homelessness: Tiny home village to open next week in Halifax suburb

Published

2 weeks ago

October 24, 2024

Anne Joseph

HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

Published

3 weeks ago

October 17, 2024

Anne Joseph

Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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