The Endless Cleanup at China’s Most Indebted Property Developer
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The Endless Cleanup at China’s Most Indebted Property Developer

China Evergrande Group feels the heat again as plans to reduce leverage rapidly.

By Mike Bird
Tue, Jun 8, 2021 10:48amGrey Clock 2 min

Dogs bark, horses neigh, and investors worry about the financial health of China’s most leveraged property developer. The pattern is almost uncannily routine, but the latest drama at China Evergrande Group still bears watching.

The most recent wobble relates to the company’s relationship with Shengjing Bank, a regional lender in which it began buying a stake five years ago. Mainland Chinese media reports suggested that regulators are examining the bank’s transactions with Evergrande. Last week Chinese regulators warned that some small and midsize banks had exploited restrained property lending by their larger peers to expand their own exposure.

The company said on Monday that its financial links with Shengjing Bank were legally sound. Last week, Evergrande Chairman Hui Ka Yan promised to get on the good side of one of the government’s three red lines for property-developer leverage by the end of the month, doubling down on plans in the company’s last annual report.

Markets don’t seem entirely convinced that all is fine. On Friday, the yield on Evergrande’s dollar bonds maturing in March next year reached 19.8%. That is not anything like the near-30% levels of September last year, during the last panic about the company’s financial future, but it is up by more than 10 percentage points in the past two weeks.

For investors, Evergrande has been both a dream and a nightmare. The company’s stock is borderline uninvestable for bulls and bears alike, swayed regularly by buybacks and highly concentrated ownership. But its bonds, perpetually priced as if the company is at serious risk of collapse, have been enormously profitable for iron-stomached believers in the company’s political nous.

That doesn’t mean its frenetic business model won’t catch up with it eventually. Paying down some of its mountain of debt sounds like a good idea. So why hasn’t Evergrande done it before? The simple answer is that the company’s business model requires relentless growth and constant financing. Its compound revenue growth rate over the past decade is around 35% a year, outstripping that of U.S. tech giants like Apple and Amazon.

Paying off its debts is not a matter of simply trying harder; it needs to find money to do so. The most obvious route is to lean on less organized creditors instead of banks and bond investors. At the end of 2020, the company had over 1 trillion yuan (A$201 billion) in trade payables and contract liabilities, owed to suppliers and home buyers respectively, up almost 20% from a year earlier. The contract liabilities figure is one to watch in particular.

Unless bearish investors think they have some specific political insight that has escaped even the sector’s insiders, there is no point trying to guess which minor crisis might finally deal the company a more serious blow. But just because it can’t be timed, doesn’t mean that the day won’t eventually come.



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We reveal the No. 1 areas for price growth in each capital city

By Bronwyn Allen
Thu, Jul 18, 2024 3 min

Home values across Australia rose by a median 8 percent in FY24, delivering the equivalent of $59,000 in new capital growth to the two-thirds of the population that owns a home, according to CoreLogic data. Investors received total returns of 12.2 percent over the year, including capital gains and gross rental income.

Very tight supply and demand in most capital cities except Melbourne and Hobart was a significant driver of the capital growth, with the smaller and more affordable capital cities of Perth, Brisbane and Adelaide experiencing the most price appreciation over the year. A lack of properties for sale trumped the usual dampening effect of higher interest rates.

As usual, some areas outperformed their city’s median growth benchmark. Here are the top SA3 areas for capital growth in each capital city of Australia in FY24. SA3 areas are large suburbs, or districts incorporating clusters of suburbs, with more than 20,000 residents.

 

Sydney

Home values across Sydney rose by a median 6.3 percent in FY24. The No. 1 area for growth was Mount Druitt. Its median value rose by 13.96 percent to $859,939. Mount Druitt is located 33km west of the CBD. It incorporates the suburbs of Mount Druitt, Ropes Crossing, Whalan and Minchinbury. The Mount Druitt community is very multicultural with almost one in two residents born overseas. It is home to many young families, with the median age of residents being 33 compared to the NSW median of 39.

 

Melbourne

Home values across Melbourne rose by a median 1.3 percent in FY24. The top area for capital growth was Moreland-North with 4.71 percent growth. This took the district’s median home value to $746,488. Moreland-North includes the suburbs of Hadfield, Pascoe Vale and Glenroy. It’s a multicultural community with a particularly large contingent of residents with Italian ancestry. One or both parents of 66 percent of residents were born overseas, according to the 2021 Census.

 

Brisbane

Home values across Brisbane rose by a median 15.8 percent in FY24. The No. 1 area for growth was Springwood-Kingston in Logan City. Its median value swelled by 25.55 percent to $710,569. Springwood-Kingston is approximately 22km south of Brisbane CBD. It incorporates the suburbs of Springwood, Kingston, Rochedale South and Slacks Creek. It is a multicultural community with one or both parents of 55 percent of the residents born overseas, according to the 2021 Census. More than 15 percent of residents have Irish or Scottish ancestry.

 

Adelaide

Home values across Adelaide rose by a median 15.4 percent in FY24. The best area for capital growth was Playford in Playford City. Its median value soared by 19.94 percent to $530,991. Playford is approximately 40km north of Adelaide. It incorporates the suburbs of Elizabeth Downs, Elizabeth Grove, Angle Vale and Virginia. It is home to many young people under the age of 40. The median age of residents is 33 compared to the state median of 41.

 

Perth 

Home values across Perth rose by a median 23.6 percent in FY24. The No. 1 area for growth was Kwinana in Kwinana City. Its median value skyrocketed by 33.19 percent to $618,925. Kwinana is approximately 37km south of Perth CBD. It includes the suburbs of Leda, Medina, Casuarina and Mandogalup. Henderson Naval Base is located here and there is a significant community of servicemen and ex-servicemen living in the area. It is home to many young families, with the median age of residents being 33 compared to the state median of 38.

 

Canberra

Home values across the nation’s capital rose by a median 2.2 percent in FY24. The best area for capital growth was Weston Creek. Its median value rose by 5.24 percent to $937,740. Weston Creek is approximately 13km south-west of the CBD. It includes the suburbs of Weston Creek, Holder, Duffy, Fisher and Chapman. Approximately 43 percent of residents have a bachelor’s degree, which is on par with the ACT median but much higher than the national median of 26 percent. Household incomes are about 35 percent higher than the national median. Almost one in five residents work in government administration jobs.

 

Hobart

Home values across Hobart fell 0.1 percent in FY24. The top performing area for capital gains was Sorell-Dodges Ferry with 2.78 percent growth. This took the area’s median home value to $615,973. Sorell-Dodges Ferry is approximately 25km north-west of Hobart. It incorporates the suburbs of Richmond, Sorell, Dodges Ferry, Carlton and Primrose Sands. The area has a large community of baby boomers and retirees, with the median age of residents being 43 compared to the Australian median of 38.

 

Darwin

Home values across Darwin rose by a median 2.4 percent in FY24. The No. 1 area for growth was Litchfield. Its median value moved 3.21 higher to $672,003. Litchfield is about 37km south-east of Darwin and includes the suburbs of Humpty Doo, Acacia Hills and Southport.  It has a high proportion of middle-aged residents, with the median age being 39 compared to the territory median of 33. About 12 percent of residents are Indigenous Australians. The biggest industries are government administration and defence. Median household incomes are about 35 percent higher than the national median.

 

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

35 North Street Windsor

Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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