Chinese property developers' cash flows have plunged by more than 20%

cnbc.com:

BEIJING — Chinese property developers' cash flows — a sign of the companies' ability to stay afloat — shrank this year after steady growth over the last decade, according to Oxford Economics.

Developer cash flows through July are down 24% year-on-year on an annualized basis, according to analysis from the firm's lead economist, Tommy Wu.

That's a sharp slowdown from growth for nearly every year since at least 2009, the data showed. Total funding as of July was 15.22 trillion yuan ($2.27 trillion) on an annualized basis, versus 20.11 trillion yuan in 2021.

The drop comes as credit demand in China missed expectations in July, and property developers' struggles drag on.

About two years ago, Beijing started to crack down on developers' high reliance on debt for growth. Notably, Evergrande defaulted late last year. Other developers like Shimao have also defaulted, despite appearing to have healthier balance sheets.

While investors have turned cautious on Chinese property companies, developers now face the risk of losing another important source of cash flow: homebuyer pre-payments.

Homes are typically sold ahead of completion in China. But since late June, some homebuyers have protested apartment construction delays by halting mortgage payments.

«The crux of the problem is that property developers have insufficient cash flows – whether because of debt-servicing costs, low housing sales, or misuse of funds – to continue with projects,» Wu said in a report last week.

«Resolving this problem will rebuild homebuyers' confidence in developers, which will help support housing sales and, in turn, improve developers' financial health.»

More than $2 billion in high-yield property developer debt is due in September — that's more than