In continuing
signs of recovery for Chinese real estate
, large developers such as Country Garden Holdings and Longfor
Properties are now seeing higher prices paid for each company's
bonds.
[caption id="attachment_70235" align="alignright" width="300"
caption="Housing in Long Shi Ti Tian, China"]
[/caption]
This is a bullish sign for international real estate. The
Chinese housing market is vital for the domestic economy of the
People's Republic -- but demand from China is crucial for many
other countries too. It is the world's biggest consumer of
commodities such as copper, coal and iron ore, all of which are
needed for a healthy real estate sector.
Government entities across China have instituted programs to
encourage home buying. Lower interest rates and greater access to
mortgages have all resulted in greater home sales. The last two
months of selling homes in
China has seen higher prices after two years of
declines
. As a result, investors are paying more for the bonds of Chinese
real estate developers.
Standard Chartered Bank head of capital markets for northern
Asia Anthony Arnaudy states, "Investor appetite is there.
The fundamentals of the Chinese property sector are healthier." The
prices for some Chinese real estate developer bonds have increased
more than 50% due to the improving financials of the companies.
This is seen in the improving market conditions for the debt of
Chinese real estate developers, and the equity price for Xinyuan
Real Estate Co. (
XIN
,
quote
), a Chinese home builder. Year to date, Xinyuan Real Estate is up
by 65.88%. On a quarterly basis it has sales growth surging by
38.52%, and earnings-per-share soaring by 130.53%. Unlike most
American home builders, Xinyuan Real Estate has a high dividend
yield of 5.67% and a low-to-debt equity ratio of only 0.32.
The $36 billion bond market for Chinese real estate developers
is monitored closely by global investors for insight into the
overall economic health of the People's Republic. For the
international real estate market to be healthy, the Chinese housing
market must be robust.
