The issuance of asset-backed securities (ABS) by China’s real-estate sector surged to unprecedented heights in the first half of 2018, as regulators cracked down on conventional financing channels for developers amidst Beijing’s ongoing deleveraging campaign.
Figures from financial data provider Wind indicate that during the period from January to June 2018 a total of 75 real estate ABS were issued that raised around 90.02 billion yuan, for year-on-year growth of 82.8%.
While data from the China Index Academy indicates that bank loans are still the primary financing source for real estate companies, analysts say that Beijing’s deleveraging campaign and crack down on the finance sector are compelling developers to search for other funding options.
“The rise in financing costs, as well as scrutiny by the China Securities Regulatory Commission of bond issuance by real estate companies and their usage of funds has put a block in the path of ‘new debt to payback old debt,” said one analyst from the China Index Academy to Xinhua.
According to the analyst this tightening of conventional financing channels and policies that support real estate securitisation have driven the issuance of ABS by the real estate sector to “new heights.”
“The volume of new real estate trust financing also fell in the first half. Against this background of comprehensive tightening of financing channels, the financing channels of real estate companies are becoming more diversified, and enterprises are continually exploring new financing models…real estate ABS are welcoming explosive growth.”