Global Funds Exit China Real Estate Amid Steep Losses and Distressed Sales As Oversupply Expected to Take Years to Be Absorbed (www.newfortunetimes.com)
from Hotznplotzn@lemmy.sdf.org to world@lemmy.world on 28 Oct 19:11
https://lemmy.sdf.org/post/44825094

cross-posted from: lemmy.sdf.org/post/44824942

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Foreign investors who once saw China’s booming property market as a sure bet are now facing some of their biggest losses in decades. What was once a $140 billion push into Chinese real estate has turned into a wave of distressed sales and write-downs, with global players scrambling to offload assets at steep discounts.

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Their retreat is adding fresh pressure to China’s already struggling property market, a sector that plays a huge role in the country’s economy.

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Distressed sales — where owners sell under pressure from debt or defaults — hit 114 billion yuan (S$20.78billion) across 2023 and 2024, a record 22% of all transactions, Bloomberg Intelligence data shows.

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All Sectors, One Struggle

The downturn is hitting nearly every corner of the commercial property market.

In logistics, once considered a bright spot thanks to the e-commerce boom, supply has outpaced demand. Even giants like Blackstone have started to sell. Earlier this year, it sold three logistics parks in southern China to a local insurance company for about 2.7 billion yuan.

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Even distressed-debt specialists like Oaktree Capital have had difficulty turning a profit.

In 2021, Oaktree seized control of Evergrande Venice on the Sea, a sprawling resort development in Jiangsu province, after the troubled developer defaulted on a $400 million loan. The project — envisioned as a Chinese version of Venice — included canals, a grand hotel, and a conference center modeled after the U.S. Capitol.

Oaktree has since restarted construction and handed over some homes to buyers, but sales remain sluggish. Apartments that once fetched up to 10,000 yuan per square meter in 2019 are now advertised at less than half that price.

The pain may not be over. Analysts warn that it could take years for the oversupply of commercial buildings to be absorbed. Rents in China’s office market fell nearly 7% in 2024 — the sharpest drop on record — and CBRE expects no meaningful recovery in new supply until at least 2028.

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“Global institutions are increasingly taking the view that this market won’t recover soon,” said Wilson. He expects office rents to keep falling through next year, and predicts that the nominal value of buildings in 2030 will still be below 2020 levels.

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#world

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neighbourbehaviour@lemmy.world on 28 Oct 19:50 next collapse

Bloomberg reports that big global investors like BlackRock, Carlyle Group, and Blackstone have spent the past year selling office towers, warehouses, and malls for much less than they paid. Their retreat is adding fresh pressure to China’s already struggling property market, a sector that plays a huge role in the country’s economy.

Won’t someone think of the multinational investment firms…

Hotznplotzn@lemmy.sdf.org on 28 Oct 19:54 collapse

It’s unfortunately not so easy. Many Chinese people poured a lot of money - some even their life savings - into property that is now worth much less than they paid or have never been built as the developer went bankrupt.

As one report on Evergrande said already in 2023:

In 2021, just months before the Chinese property giant Evergrande showed the first signs of crisis, Guo Tianran (whose name has been changed on request) and her husband bought an apartment off-plan for their only child from the top-selling developer.

The couple, nearing their 60s, had scrimped to afford the $30,000 (£24,500) down payment on the yet-to-be-built flat. They bit the bullet in pledging to use 75% of their income to pay for the mortgage.

“We wanted to help our son, to give him a place to start out on once he graduates from college,” Mrs Guo told the BBC earlier this month. But just months after their purchase, Evergrande’s facade began to crack.

In Henan, the central Chinese province where they had bought the home, building work ground to a halt.

“We saw the main frame being built, and suddenly we heard that Evergrande was falling. Then construction stopped last year,” she says […] “When I think about it, I cry,” says Mrs Guo about the home she had bought. “It’s hard, and I feel sorry for my son and myself.”

You’ll find more reports than this one, and they are devastating not only for institutional investors but also for retail customers like Mrs. Guo in this report.

CanadaPlus@lemmy.sdf.org on 28 Oct 20:09 collapse

Most investors are normal-ish people, even.

The weird part is that anyone outside of China was buying up Chinese real estate in the first place. The oversupply issue has been on the radar for years and years.

evenglow@lemmy.world on 28 Oct 20:20 collapse

The weird part is foreign investment kinda ignored all the Chinese real estate investments outside of China done by China nationals.

realitista@lemmus.org on 28 Oct 22:44 collapse

I’m surprised it’s taking this long, this Chinese real estate oversupply problem has been well known for a long time now. It will take ages to correct.