Hong Kong’s property market kept pressuring the economy as the Easter break ended, deepening the sector’s woes. The real estate developer Vanke, which had warned before the holidays that annual profits would fall by half, posted another record slide. Country Garden, once the nation’s largest promoter, paused trading because it had not released last year’s accounts. On any given day, headlines remain unsettling for a sector that once accounted for a sizable slice of the economy and now drags growth down.
Country Garden serves as a stark example of the decline. Between 2017 and 2022 its stock was worth roughly a few cents per share today, compared with around 2.35 dollars then. The board had attributed the fall to ongoing volatility in the industry and a business climate that grows more complex by the day. The Foshan-based housing giant, focused on smaller inland cities rather than saturated megacities like Beijing or Shanghai, expanded rapidly on the back of China’s urbanization. That surge, as dramatic as the later collapse, relied on developers using sales revenue from new projects to finance further buildouts. Accumulated defaults and hidden losses over the years culminated in a creditor’s bid for liquidation in the Hong Kong courts in February.
Debt burdens among giant developers
Judgments in the current period are often compared with Evergrande, the other titan of the sector. For years they vied for profit; today they contend with heavy debt. Evergrande’s liabilities exceed Country Garden’s, yet the scale of unfinished projects tells a different story. Evergrande carries about 328.0 billion dollars in debt versus Country Garden’s 190.0 billion. However, Country Garden’s outstanding projects number in the thousands, overshadowing Evergrande and signaling a potentially broader impact on the market.
The Hong Kong judiciary has already ordered Evergrande’s liquidation after a protracted legal process, involving multiple delays and unsuccessful negotiations with numerous creditors. Market watchers debate whether mainland courts will authorize asset sales to satisfy lenders. As for Hui Ka Yan, Evergrande’s founder and president, questions loom about allegations of inflated profits and the potential consequences for him in financial markets and beyond. His case has also drawn scrutiny for the firm’s auditor, PricewaterhouseCoopers, which faced questions about its role. Authorities are examining accountability, and liquidators are weighing lawsuits as the company’s fate unfolds.
The building boom ran unbridled for decades. A real estate sector driven by rising middle income, massive rural-to-urban migration, and limited investment options fed a cycle that seemed to require ever more land and financing. With both existing inventory and new home stock, the total value of the sector neared 50 trillion dollars in 2019, twice the size of the U.S. market. Land sales funded local governments and developers alike, and the profits from selling properties under construction helped sustain further rounds of construction. The system thrived on the belief that rising housing sales would continuously propel the wider economy forward.
Pandemic effects and mounting debts
The Covid era, combined with Beijing’s tighter lending controls on property developers facing mounting debt, dealt a sharp blow to the business. The industry halted abruptly. Between 2013 and 2020, promoters delivered only about 60 percent of homes that had been pre-sold, according to Nomura’s recent analysis. Estimates indicate tens of millions of apartments remain vacant or unfinished. Prices endured several years of decline, and with urban wealth concentrated heavily in this sector, a broad swath of households faced growing financial stress. Mortgage protests in nearly a hundred cities underscored the fragility of the landscape, with families anxious about timely deliveries and loan obligations.
This environment complicates the government’s goal of social stability. Authorities seek to ensure the delivery of promised homes while maintaining financial resilience. A renewed credit line is being opened to support stalled projects. Beijing recently announced a package around 200 billion yuan (roughly 26 billion euros) aimed at advancing 6,000 projects. The overarching objective is less about restoring the old boom and more about preserving the housing market’s functioning and preventing systemic disruption. The current policy language emphasizes developing new production models that emphasize quality, technology, and innovation as the engine of growth. The latest National People’s Congress message was clear: weak real estate players will exit, while the healthier ones survive and adapt.