Real estate: Chinese developer Sunac misses payment due to real estate crisis

China’s property crisis could be about to claim another scalp, after a previously healthy developer suddenly slipped this month.

A new Chinese developer appears to be following in Evergrande’s footsteps, after missing a crucial payment and sending shockwaves through the already struggling industry.

The crisis surrounding China’s property market has been in global headlines for months, with the Evergrande juggernaut dominating initial coverage.

Since then, a series of other top companies have also slipped, including Fantasia, Modern Land, Kaisa Group Holdings and many others.

And now a surprising new name has been added to this grim list.

Earlier this month, Sunac China Holdings, which was founded by billionaire Sun Hongbin, announced in a Hong Kong Stock Exchange filing that it had defaulted on interest payments on a $742 million offshore bond. dollars (1.05 billion Australian dollars).

The company also added that it was unlikely to make payments on any other notes maturing this year and in 2023.

“Given the group’s current liquidity constraints, there can be no assurance that the group will be able to meet its financial obligations when due or within the relevant grace periods,” the company said in a statement.

He added that contract sales for March and April this year had fallen by 65% ​​year-on-year, which “has further exacerbated the group’s current liquidity constraints”.

It is understood that the controversial Covid lockdowns in China – particularly in Shanghai – have deepened existing cracks within the industry, which began to emerge after property prices began to fall in smaller towns , and when the Chinese government implemented measures to limit over-the-top mortgage borrowing via its “three red lines” policy, leaving Evergrande and other companies in the lurch with mountains of debt.

The sector has also been further hampered by a weaker yuan in recent months.

However, until now Sunac was widely considered to be in fairly good financial shape, with Mr Hongbin insisting last year that his business would never ‘bomb’ the way others have – meaning that the latest announcement is all the more shocking.

A source close to the company told Reuters that Sunac was now considering whether to restructure its offshore debt to extend payments, and was in talks with “public entities about strategic investments in the business”.

The disaster has also affected Sun personally, with his net worth plummeting by more than 70% from 2021 to around US$2.5 billion (AUD$3.5 billion) today.

Meanwhile, Sunac has frozen trading in its shares since April 1.

‘Impossible mission’

IG Markets analyst Hebe Chen told that the Sunac news would be a blow to the sector which had already been reeling from other high-profile defaults.

“From an investor’s point of view, it is quite certain that the confidence in the sector that has been built up over the past decades will be very difficult to regain, especially since Sunac is only one of ‘between them,’ she said.

“But the biggest risk actually comes from the macro image.

“As we know, China is rushing to save its economy from falling growth rate. The absence of the real estate sector, which contributes up to 25% of its GDP, can make it a “mission impossible”.

“Some might argue that China recently gave the real estate sector a boost by lowering the loan rate for first-time home buyers, but the 16% youth unemployment rate suggested just how this move might help.”

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Elaine R. Knight