Thread by @Birdyword, There's some interesting stuff going on in China's property market right now, [...]

Mike Bird

Birdyword

There's some interesting stuff going on in China's property market right now, with some of the tensions I've written about over the last 2yrs getting worse.

First: government often talks a big game on RE deleveraging. It now looks like it means it. (1/5) https://www.wsj.com/articles/beijings-squeeze-on-fragile-real-estate-developers-is-getting-real-11619682390

Beijing’s Squeeze on Fragile Real-Estate Developers Is Getting Real

Broad bank lending to the real-estate sector, and developers’ access to bond markets, are both being squeezed. The companies are increasingly dependent on large deposits from home buyers.

https://www.wsj.com/articles/beijings-squeeze-on-fragile-real-estate-developers-is-getting-real-11619682390

If RE developers are seriously constrained on both bank and bond mkt finance, *and* maybe mortgage lending, then there's only one significant source of financing available to them.

Deposits from buyers are +29% in the last 12 months, now the largest single portion. (2/5)

Households are unsophisticated creditors, many won't know that they're not paying for their own homes to be built - they're paying to finish years-old construction.

So when deliveries begin to lag, buyers worry. This is popping up more in media (3/5) http://www.xinhuanet.com/fortune/2021-04/13/c_1127325975.htm

You can now see this not just in the national-level statistics, but in the financialreports of major developers. Growing gaps between properties which much eventually be completed and what's being built annually.

Vanke alone has *$100 billion* in unearned revenues! (4/5)

You can keep the show rolling longer if you really squeeze households, lengthening time between purchase and delivery. But buyers are a way bigger political sensitivity for govt than bondholders.

Worth keeping a v close eye out for construction delay protest stories (5/5)

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