This article is from the Australian Property Journal archive
EVERGRANDE has revealed that it cannot issue new debt to restructure its offshore liabilities, whilst a former high-level official said there are enough vacant apartments in China to house 3 billion people and the country would struggle to fill up all the empty homes even if every man, woman and child were given a house today.
In a surprise development, the world’s most indebted property developer said in a statement to the Hong Kong Stock Exchange that it cannot issue new notes due to an ongoing investigation into its domestic subsidiary, Hengda Real Estate Group, which is being investigated by regulators over alleged disclosure violations.
This comes as another filing showed Hengda is also facing legal action from creditors to freeze its assets over 12.6 billion yuan (US$1.7 billion) of debt.
This latest development has made Evergrande’s plan to restructure its offshore debt even harder as it is prevented from raising new capital.
“Its debt restructuring plan is now stuck and can’t go any further,” said Steven Leung, sales director at UOB Kay Hian in Hong Kong told Reuters. “Other options, such as converting the debt into shares of other listed units, are also seen not workable now.”
Meanwhile an oversupply of vacant homes put the future of China’ real estate recovery is in doubt, after a former deputy head of the National Bureau of Statistics (NBS) revealed the extent of the crisis.
He Keng, 81, told a forum in the southern Chinese city Dongguan that even China’s 1.4 billion population would not be enough to fill all the empty homes.
Official data from the NBS shows unsold homes totalled 648 million square metres or about 7.2 million as of the end of August.
But He believes that figure grossly underestimates the extent of the crisis.
That is because the NBS data does not include projects that have already been sold but construction has stalled as developers faced cashflow problems.
Late last year homebuyers began boycotting mortgage repayments because they are worried that the properties they bought from distressed developers will not be completed.
The NBA data also does not include buildings that are partially completed after the developer went broke, leaving buyers in limbo.
Construction worker Shi Tieniu, 39, told The Japan Times that he bought a presale apartment in northwestern China’s Shaanxi province and it remains an unfinished eight years later.
Shi said every night he climbs 20 flights of stairs to sleep in shell without water, heating or electricity.
“I want this to be finished as soon as possible, so my elderly parents have somewhere to spend their final years. … I have no money now, I’ve lost my family property and all that’s left is this unfinished building,” said Shi.
Meanwhile He estimates that China’s empty homes would need more than every man, woman and child today to fill.
“How many vacant homes are there now? Each expert gives a very different number, with the most extreme believing the current number of vacant homes are enough for 3 billion people,” said He.
