Chinese property developers have experienced a surge in stock prices as major Chinese cities have announced plans to relax mortgage policies, aiming to stabilize the real estate market. The Hang Seng Mainland Properties Index rose 8.2% following the news.
Hong Kong-listed Longfor Group Holdings saw a 10% increase in its shares, while Seazen Group witnessed a 17% jump. In Shanghai, Gemdale’s shares rose by 4.1%, and China Vanke gained 1.4%.
Lowering Mortgage Requirements
Beijing, Shanghai, and other major cities across China have recently eased mortgage requirements for specific homebuyers, effectively lowering the threshold for purchasing a home. This nationwide policy initiative aims to stimulate the property sector and is seen as a crucial step by top policymakers who have become increasingly concerned about the decline in the real estate market.
According to analysts at Nomura, this move is significant due to the growing number of credit risk events among major developers and financial institutions since mid-August.
Boost for Property Giant
Country Garden Holdings, a prominent property company, experienced an uplift in sentiment as news reports emerged over the weekend indicating that the company had received creditor approval to extend a bond. This positive development caused Country Garden’s shares to rise by 9.0%, reaching 0.97 Hong Kong dollars (equivalent to 12 U.S. cents).
Although the company’s stock has declined by 64% year-to-date following its worst loss since going public 16 years ago and missing $22.5 million in interest payments on its dollar bonds in August, the bond extension brings some relief.
Furthermore, S&P Global Ratings credit ratings analyst Oscar Chung warns that persistent earnings weakness could result in greater leverage for the sector. However, industry leaders and real estate companies with diverse sources of income, such as rental and service incomes, may be better equipped to withstand declining development margins.