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Entering the second half of the year, new changes have occurred in real estate financing. On August 13, CRIC released data showing that in July this year, the total financing of 65 typical real estate companies was 52.346 billion yuan, a month-on-month increase of 63.8%, and the monthly financing scale hit a new high since 2024. From the perspective of financing structure, in July, real estate companies raised 50.026 billion yuan in domestic debt financing, a month-on-month increase of 56.6% and a year-on-year increase of 12%; overseas debt financing was 2.32 billion yuan, a year-on-year decrease of 67.9%.

However, overall, real estate financing has remained sluggish this year. In the first seven months of this year, 65 typical real estate companies raised a total of 267.847 billion yuan, a year-on-year decrease of 32%. CRIC analysis pointed out that real estate sales have not yet fully recovered, so there are still real estate companies that may default on their debts in the future, and liquidity issues still need the industry's attention.

Liu Shui, director of corporate research at China Index Academy, also told the Daily Economic News reporter: "Since there has been no significant improvement in the current real estate market, financial institutions and others still have weak expectations for the industry."

The financing volume of 65 real estate companies decreased by 9%

Although the total financing amount of 65 typical real estate companies reached 52.346 billion yuan in July, an increase of 63.8% month-on-month, and the monthly financing scale reached a new high since 2024, it was still down 9% year-on-year.

The reporter noticed that among the 65 typical real estate companies’ financing in July, Vanke alone obtained 32.666 billion yuan in bank loans, accounting for more than 60%. In terms of cumulative financing, in the first seven months of this year, the financing amount of the 65 typical real estate companies was still shrinking, with a total financing amount of 267.847 billion yuan, a year-on-year decrease of 32%.

On July 18, Vanke announced that in order to meet operational needs, its subsidiaries Shenzhen Jiuzhou Real Estate Development Co., Ltd. and Chongqing Xipan Real Estate Co., Ltd. respectively mortgaged the land they held to banks and raised a total of 14.728 billion yuan in financing from banks, with a term of 4 years.

On July 11, Vanke also obtained another loan, namely Vanke and its holding subsidiary Vanke Logistics Development Co., Ltd. applied to the bank for a total of 2.741 billion yuan in loans. These loans were secured through equity pledge and asset pledge.

However, it should be pointed out that not all bank loans obtained by Vanke are new loans. Most of them are replacements of existing loans, and are mainly concentrated at the project level. There are basically no new public credit bonds and overseas bonds.

In addition, real estate developers such as Yuexiu Real Estate and Poly Property also issued bonds for financing in July.

Among them, Yuexiu Real Estate is the company with the largest bond issuance scale. In July alone, it completed the issuance of one offshore green priority note worth 1.69 billion yuan and two corporate bonds worth a total of 1.5 billion yuan, totaling 3.19 billion yuan.

On July 12, Yuexiu Real Estate successfully issued the first corporate bond in 2024. The issuance scale of Type 1 is 500 million yuan, the face rate is 2.25%, the issuance period is 5 years, and the subscription multiple is 6.36 times; the issuance scale of Type 2 is 1 billion yuan, the face rate is 2.75%, the issuance period is 10 years, and the subscription multiple is 1.29 times.

It is worth mentioning that on August 8, Yuexiu Real Estate disclosed that its wholly-owned subsidiary Guangzhou Urban Construction Development Co., Ltd. has obtained approval from the National Association of Financial Market Institutional Investors to issue targeted debt financing instruments in the Chinese interbank market, with an issuance scale of no more than 3 billion yuan. "The issuance of this targeted debt financing instrument will provide the company with an additional source of funds to meet the company's operational needs and support its long-term development strategy."

According to CRIC data, in July, 65 typical real estate companies issued bonds worth 15.05 billion yuan, a decrease of 2.9% from the previous month and 55.6% from the previous year. The average financing cost was 2.85%, a decrease of 0.41% from the previous month and 0.67% from the previous year. "Since the companies that issue bonds domestically are mainly state-owned enterprises such as Shoukai, BBMG, and Poly Real Estate, the domestic financing cost remains at a relatively low level."

In terms of additional issuance, CCCC Real Estate completed an additional issuance of 51.6647 million shares on July 10, raising a total of 444 million yuan, with a net amount of 438 million yuan after deducting issuance expenses. In addition, Rongsheng Development's additional issuance plan is still under internal evaluation, and Xiamen International Trade responded to the Shanghai Stock Exchange's inquiry on the company's additional issuance plan on August 6.

"Overall, the progress of private placements by most listed real estate companies in the country is still relatively slow. For example, the share issuance plans of Poly Developments and Dacheng Real Estate, which have been approved for registration by the exchange, have not been completed yet. At the same time, many real estate companies have announced the termination of private placements," CRIC analysis pointed out.

Real estate companies actively issued overseas bonds in August

Although domestic financing for real estate companies improved in July, overseas financing remains not optimistic.

According to CRIC data, in July, 65 typical real estate companies raised only 2.32 billion yuan in overseas debt financing, a year-on-year decrease of 67.9%. According to statistics from China Index Academy, in the first seven months of this year, the scale of overseas debt issuance by real estate companies was only 6.7 billion yuan, a year-on-year decrease of 39.5%. From a monthly perspective, real estate companies did not issue new bonds in May, and only a few high-quality companies were able to issue overseas bonds in the remaining months. For example, Yuexiu Real Estate, Swire Properties and Sun Hung Kai Properties successfully issued overseas bonds in July.

"Since there has been no significant improvement in the current real estate market, financial institutions and others still have weak expectations for the industry. At the same time, the more financing a real estate company has, the more debt it has, and the greater the pressure to repay the debt in the future. Some companies focus on stable operations and will take the initiative to reduce their debt scale and moderately reduce financing," Liu Shui told reporters.

It is worth noting that since August, there has been a positive trend in overseas debt issuance by real estate companies, and some private real estate companies that have been in trouble have even successfully issued US dollar bonds.

According to China Real Estate News, Longfor and KWG entrusted JPMorgan Chase as the exclusive underwriter to arrange refinancing for the loan of the luxury residential project, The Ritz-Carlton, Mid-Levels, Hong Kong. The loan was completed on August 10, with a total of US$1.05 billion raised. The loan will be used to support the loan repayment and development and operation of the Ritz-Carlton, Mid-Levels, Hong Kong.

"Combined with previous market news, this dollar bond is a private placement bond, which will be used to replace previous loans and support the subsequent work of the Kaiyue project. The capital cost may be relatively high. However, the project is currently selling well and the cash flow stability is relatively strong." Liu Shui said that in the short term, as the sales market is still in the process of bottoming out and recovering, the risks of overseas debt have not yet been cleared, and the issuance of overseas bonds will still be open to a few high-quality real estate companies. It will take some time for the overall recovery of the real estate companies' overseas financing market.

In addition, in terms of debt defaults, according to Orient Securities' monitoring, three new domestic debt extension bonds were added in July, involving a bond balance of 4.19 billion yuan. The entities involved were Xiamen Zhongjun, Xuhui Group and Contemporary Energy Saving Real Estate. Among them, Xiamen Zhongjun had its first domestic debt extension.

According to CRIC data, 19 real estate company bonds matured in July, and after deducting the part that has been redeemed in advance, the total amount was about 26.7 billion yuan, a decrease of 42% month-on-month. In August, 26 real estate company bonds will mature, and after deducting the part that has been redeemed in advance, the total amount was about 40.2 billion yuan, an increase of 51% month-on-month.

It is worth noting that in the first half of this year, the amount of bonds due by real estate companies reached 279.9 billion yuan, while the amount of bonds issued was only 96.1 billion yuan. It is clear that the newly issued bonds cannot cover the old bonds due. Moreover, affected by the debt extension of real estate companies in recent years, according to CRIC's monitoring, the amount of bonds due by real estate companies in 2025 will exceed 500 billion yuan, a year-on-year increase of 7% compared with 2024.

Daily Economic News