China developers face cash crunch as coronavirus freezes home sales

SHANGHAI - China's debt-laden developers are facing a cash-crunch as the coronavirus outbreak brings the property market to its knees.

The ramifications of a housing market in limbo are potentially huge. Not only does the property industry directly account for about 7 per cent of China's GDP, that climbs to about one-fifth of economic output once indirect contributions are added, and the flow-on effect could smash demand for building materials like steel and cement, as well as new appliances and furnishings, putting millions of jobs at risk.

New apartment sales plummeted 97 per cent in the first week after the Lunar New Year holiday from a year earlier, according to China Real Estate Information Corp. Fewer than four units a day were sold in Beijing, whereas daily transactions would usually number about 400. Fantasia Holdings Group Co. has upped the ante even further, with a 'buy two apartments, get one free offer,' and is taking deposits of as little as 1,777 yuan. Not only that, if a buyer backs out within 30 days, they get their deposit back, plus interest.

Home price growth will slow to 2 per cent this year, said Yang Hongxu, a director at E-House China Enterprise Holdings Ltd's research institute. That would be the smallest increase since the 2008 financial crisis. Before the epidemic, he'd been forecasting 4 per cent growth.Local authorities in Foshan and Chengdu have allowed showrooms to open as long as visitor numbers are minimized. Shanghai and Xi'an allowed fees for land purchases to be delayed.

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