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Evergrande collapse could have a 'domino effect' on China's property sector, AllianceBernstein says – CNBC

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3 years ago

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The Evergrande Group or Evergrande Real Estate Group logo of a Chinese real estate company is seen on a smartphone and a PC screen.
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China’s “highly distressed” real estate companies are at risk of collapse as the country’s highly indebted developer Evergrande is on the brink of default, warns AllianceBernstein’s Jenny Zeng.

Speaking with CNBC’s “Street Signs Asia” on Friday, the co-head of Asia fixed income at AllianceBernstein warned of a “domino effect” from a potential Evergrande collapse.

“In the offshore dollar market, there is a considerable large portion of developers (who) are implied to be highly distressed,” Zeng said. These developers “can’t survive much longer” if the refinancing channel remains shut for a prolonged period, she added.

Evergrande, the world’s most indebted property developer, is crumbling under the weight of more than $300 billion of debt and warned more than once it could default. Banks have reportedly declined to extend new loans to buyers of uncompleted Evergrande residential projects, while ratings agencies have repeatedly downgraded the firm, citing its liquidity crunch.

The financial position of the other Chinese property developers also took a hit following rules outlined by the Chinese government to rein in borrowing costs of the real estate firms. The measures included placing a cap on debt in relation to a company’s cash flows, assets and capital levels.

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While the struggling developers are tiny individually, compared to Evergrande, they make up about 10%-15% of the total market on aggregate, Zeng said. She warned that a collapse could result in a “systemic” spillover to other parts of the economy.

“Once it starts, it takes much more from a policy perspective to stop it than to prevent it from happening,” she added.

On its own, a managed default or even messy collapse of Evergrande would have little global impact beyond some market turbulence.
Simon MacAdam
Senior Global Economist, Capital Economics

Taken on its own, the financial or social risks associated directly with Evergrande itself are actually “reasonably manageable,” Zeng explained. She cited the fragmentation of the Chinese property market as a reason behind this.

“Despite Evergrande’s size – we all know it is the largest developer in China, probably the largest in the world – [it] still accounts for only 4% and now it’s even less of the total annual sales market,” Zeng said. “The debt, particularly the onshore debt, is well collateralized.”

China’s ‘Lehman moment’?

Some economists have warned that the collapse of Evergrande could become China’s “Lehman moment” – a reference to the bankruptcy of Lehman Brothers as a result of the subprime mortgage crisis, which triggered the 2008 global financial crisis.

However, Capital Economics’ Simon MacAdam described that narrative as “wide of the mark.”

“On its own, a managed default or even messy collapse of Evergrande would have little global impact beyond some market turbulence,” MacAdam, a senior global economist at the firm, said in a Thursday note. “Even if it were the first of many property developers to go bust in China, we suspect it would take a policy misstep for this to cause a sharp slowdown in its economy.”

As of Friday’s close, the company’s Hong Kong-listed shares have plunged more than 80% year-to-date.

— CNBC’s Weizhen Tan contributed to this report.

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

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5 days ago

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October 24, 2024

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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.

The Canadian Press. All rights reserved.

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Here are some facts about British Columbia’s housing market

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2 weeks ago

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October 17, 2024

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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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B.C. voters face atmospheric river with heavy rain, high winds on election day

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2 weeks ago

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October 17, 2024

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

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

The Canadian Press. All rights reserved.

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