Property Developers Return to Offshore Debt Market with a Vengeance

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Beijing has re-opened the gates to the overseas debt market for Chinese real estate developers, as property controls begin to prove effective at taming overheating housing markets.

The Financial Times reports that China’s National Development and Reform Commission has started to approve dollar-denominated offshore bond issuance again after clamping down on access to overseas debt markets over a year ago.

The Chinese central government began to crack down on overseas bond issuance by property developers towards the end of 2016, due to concerns about the country’s overheating housing market.

Data from Haitong Securities indicates that bond issuance by property developers began to shrink in Q4 2016, when total issuance dropped by a third compared to the preceding quarter to 121 billion yuan.

The trend has continued in 2017, with debt issuance by Chinese property developers in October falling 57% compared to the same period last year to a mere $502 million according to figures from Dealogic.

One source from a Chinese bank in Hong Kong said to The Financial Times that official attitudes towards offshore debt issuance by real estate developers began to shift after last month’s Communist party congress, as urban property markets cooled down in response to heavy-handed control measures.

Chinese property developers have since returned to the debt market with a vengeance, with $2.97 billion in deals priced in the offshore market for the first 11 days of November, including Vanke Real Estate’s pricing of a $1 billion 10-year bond at 3.98% on 2 November.

Analysts say the offshore bond market has recently emerged as the chief source of refinancing for many Chinese developers.

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