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The real estate sector has long been the engine (accounting for 30 percent of growth) behind
In the news:
- Investors may have already seen the pinch. The coupon was actually due in September, but
Country Garden was given a 30-day extension. - Foreign holders of the bond are now uniting, hoping to salvage another debt restructuring.
Country Garden bonds are now trading at a fraction of the price. According to Duration Finance, a bondholder could still count on a price between 4.4 and5.3 cents for every dollar sold from the bond.-
Ongoing
Country Garden projects inAustralia are now up for sale. This while there is just a great need for additional housing there, reports Reuters.
How did it come to this?
- During the corona crisis, the Chinese government decided to tighten excessive lending to real estate developers, out of concern for financial stability. As a result, Evergrande went overboard.
- A lot of developers ran into liquidity problems and the number of new projects plummeted. A brake on new housing construction was therefore necessary to bring supply back to demand levels.
- Additional housing capacity, measured per square meter, declined year after year since 2020. Official data indicate annual reductions of 2 percent in 2020, 11 percent in 2021 and last year housing capacity fell 39 percent.
The policy difference between
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