China's biggest property developers are hurting from one catastrophe or another. First, it was a slowdown in the country's economy, and now, it is the Covid-19 pandemic.
Modern Land (China), however, is hoping to "sing" its way through the crunch. The Beijing-based builder is live-streaming its sales pitches into the living rooms of prospective buyers, some in cities under lockdown in the central Hubei province, the epicentre of the coronavirus outbreak.
"Let me know what song you like and I will sing it for you," sales agent Wang Yufei says, after presenting a project on video-sharing platform TikTok. "The three-layer filter in the central ventilation system can effectively screen viruses, dirt and bacteria in the air. If you are interested in our homes, or have any questions, just add me on WeChat."
Wang's "talent show" is one of the plan B measures being adopted by developers anxious for the province and its capital, Wuhan, to fulfil their potential. Others have gone online with virtual consultants, while behemoth China Evergrande is lowering its prices for all projects in the biggest discounts ever seen.
"It is impossible to say that our business is not being impacted," said Cristiano Cui, Modern Land's managing director. "Construction and sales across the country have been suspended for about 25 to 30 days. In Hubei, the fastest we could possibly resume is at the end of the second quarter."
More than half of Chinese businesses across several industries are grappling with a cash crunch after the outbreak, according to a Hurun Report survey. The property sector has recorded a dismal start to the new year, with home sales registering their steepest declines since at least 2013, falling 35 per cent by value in January and February from a year earlier, according to figures from the National Bureau of Statistics released on Monday.
Mainland Chinese developers, which contribute about a third of the dollar-denominated junk bonds in Asia, must repay 583 billion yuan (US$83.5 billion) in debt by June this year, according to data compiled by Fitch Ratings. Defaults tend to spook the broader market because of their dominance.
"Liquidity will be hit first, as sales proceeds are the largest and most important funding source for China's developers," S&P Global Ratings credit analyst Christopher Yip said. "Several developers that were heavily leveraged before the outbreak, will face crippling liquidity issues."
Modern Land itself was loaded with about 16 billion yuan in borrowings at the end of June 2019, according to its latest financial statement. About half of that amount becomes due by the middle of this year.
Wuhan holds the most promise in terms of sales for some developers, judging by their land holdings. Jingrui Properties has about 17 per cent of its total land bank in the city, followed by Yuexiu Properties (12 per cent), Modern Land (10 per cent) and Yida China (9.4 per cent), according to BEA Union Investment. On average, builders have 5 per cent of their assets in the city.
The city's economy grew 7.8 per cent in 2019, faster than the national average of 6.1 per cent, and was one of the top 10 prosperous mainland cities and a magnet for developers last year, according to E-House China Research and Development Institute.
"Wuhan is a must-have and the first destination to gain a presence in central China," said Yan Yuejin, research director at E-House in Shanghai.
The city sold a record 172.8 billion yuan worth of land in 2019, according to Centaline Property, a 35 per cent increase over 2018 and triple the volume in Shenzhen. Top buyers included Sunac China and China State Construction Engineering, according to industry researcher Real Estate Foresight.
Wuhan's long-term future is undiminished, according to Modern Land's Cui. The provincial capital of Hubei, the city of 11 million people has prospered as a transport and manufacturing hub for some of the world's biggest companies, including French carmaker PSA, PepsiCo and Siemens AG.
In the short term, however, it is on a slippery slope. China Vanke, the country's second-largest developer, has lost 51 billion yuan in revenue since January, after sales fell to near zero.
"The more aggressive the builders were in the past two years, the worse they have been burned," said Lung Siufung, property analyst with CCB International Securities. "More than half of those saleable properties will yield nothing this year."
Modern Land is hoping its plan B will help. On February 13, the first day of its live streaming push, it chalked up 600 sales in five cities, including Wuhan, Cui said.
Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.