China’s real estate sector has lurched from crisis to crisis since 2020, when Beijing began cracking down on excessive borrowing by developers in a bid to curb its high levels of debt and curb runaway property prices.
Founded in 2001 by entrepreneur Hui Wing Mau, Shimao is developing large-scale residential projects and hotels across the country. It owns the Shanghai Shimao International Plaza, one of the tallest skyscrapers in the heart of Shanghai.
In March, the company estimated that its 2021 net income fell about 62% year over year, largely due to the “rough” environment the real estate sector is in. It subsequently delayed the release of its 2021 results, citing the lockdowns in Shanghai.
“Due to the significant changes in the macroeconomic environment of the real estate sector in China since the second half of 2021 and the impact of Covid-19, the Group has experienced a noticeable drop in its contracted sales in recent months, which is expected to continue in the short term until the real estate sector recovers stabilized in China,” Shimao said in Sunday’s filing.
The company added that it had tried to find “amicable solutions” with creditors when it came to making capital payments to other offshore companies Fault. In the absence of an agreement, creditors could force the company to speed up repayments.
The industry’s problems have been compounded by Beijing’s zero-Covid policy and the slowing economy. China severely locked down many of its major cities – including Shanghai – earlier this year to combat rising Covid cases, severely impacting business activity.
On Friday, a survey by the China Index Academy — a real estate research firm — showed that new home prices in 100 cities fell more than 40% in the first half of this year from the same period last year.
Although there are signs that June sales fell less dramatically than in previous months, the road to the property sector’s recovery is likely to be “rather bumpy” as Beijing continues to hold on to its zero-Covid approach, analysts at Nomura said in a statement on Monday.