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Analysts at Goldman Sachs already fear the worst. A probable Doomsday that is.
Here’s the BFD
1️⃣ 22 bond issuers in China (all tied to real estate) have either deferred their repayments with bond exchanges or defaulted on dollar bonds since the beginning of 2022.
2️⃣ Goldman Sachs fears a rise in property defaults to 31.6% (19% was the earlier figure).
3️⃣ With Chinese real estate tipping over, corporate default rates are anticipated at 15.5% too.
What’s happening (and could happen)
⚠ Real estate takes up a big chunk of the Chinese economy.
⚠ Realty giants like Evergrande are up to their penthouses in debt.
⚠ Goldman Sachs believes recovery is near-impossible until realty sales start bouncing back. They’re advocating more Government measures.
⚠ Sales have fallen due to stringent COVID restrictions and a host of other reasons. Daily property deals fell by 50% (YoY) this month.
⚠ Unemployment is still a problem.
Yes, Beijing is cutting mortgage rates and many local Governments are easing down payment rules. Yet, things could take time to even out, considering the earlier real estate policy where average mortgage rates outstripped average loan rates.
The future? Bleak for now although April seems to have been the harshest month for China's real estate market.
Is the worst over? Will the Government’s measures work? The only thing we can do is watch and hope the egg and tomato sector bounces back and spreads cheer again.