China’s real estate sector has been going through one crisis after another since 2020, when Beijing began to crack down on overborrowing by developers in an attempt to curb its high debt and rein in runaway house prices.
Shimao, founded by entrepreneur Hui Wing Mau in 2001, builds large residential buildings and hotels throughout the country. He owns Shanghai Shimao International Plaza, one of the tallest skyscrapers located in the heart of Shanghai.
The company estimated in March that its 2021 net income was down about 62% year-over-year, largely due to the “harsh” conditions facing the real estate sector. He then delayed the release of the 2021 results, citing the quarantine in Shanghai.
“Due to significant changes in the macroeconomic environment in the real estate sector in China since the second half of 2021 and the impact of Covid-19 in recent months, the Group has experienced a marked decline in contract sales, which is expected to continue. soon until the real estate sector in China stabilizes,” Simao said in a statement on Sunday.
The company added that it was trying to reach a “global settlement” with creditors in connection with the non-payment of principal on other offshore companies. duty. In the absence of an agreement, creditors could force the company to speed up payments.
The industry’s problems are exacerbated by Beijing’s anti-coronavirus and economic slowdown policies. Earlier this year, China imposed lockdowns in many of its major cities, including Shanghai, to combat a rising number of Covid cases, hitting business activity hard.
On Friday, a survey by China Index Academy, a research firm, showed that new home prices in 100 cities fell more than 40% in the first half of this year compared to the same period last year.
While there are indications that June sales declined less sharply than in previous months, the road to a real estate sector recovery is likely to be “rather bumpy” as Beijing remains committed to its zero-Covid approach, Nomura analysts said in a note. Monday.