China’s real estate collapse infecting troubled American sectors

By Around the Web

Ghost city in China
Ghost city in China

Will Kessler
Daily Caller News Foundation

The crumbling Chinese real estate sector is starting to put properties around the world on the market at deep discounts, threatening debt-laden American commercial developers and the U.S. banks holding the loans, according to Bloomberg.

In a bid to pay off massive debts, Chinese real estate developers are having to offload a huge number of properties onto the global market, depressing prices even further for a sector that already has had borrowing cost hikes, causing a loss of $1 trillion in office property values, according to Bloomberg. The drop in property values hits American commercial real estate particularly hard due to the huge amount of debt the sector holds and the dwindling U.S. demand, with banks that hold the debt also fearing they may lose out on their investment.

Get the hottest, most important news stories on the Internet – delivered FREE to your inbox as soon as they break! Take just 30 seconds and sign up for WND’s Email News Alerts!

“With motivated sellers, the market freeze could thaw, improving transparency and price discovery,” Tolu Alamutu, a credit analyst at Bloomberg Intelligence, told the outlet. “Portfolio valuations may have further to fall.”

As time progresses and more properties sell at a discounted rate, buyers will hone in on the running market rate that will set property values, lowering the evaluation as new Chinese-owned properties flood the global market, according to Bloomberg.

A court in late January ruled that top Chinese developer Evergrande Group has to liquidate more than $300 billion in liabilities after being unable to create a restructuring plan despite two years of trying. The collapse is part of a broader crisis that has resulted in companies that are responsible for around 40% of homes in China defaulting on their debt since 2021.

American commercial real estate is facing $2.81 trillion in loans that are set to expire sometime through 2028, with developers either having to pay outright when the term comes due or refinance their debts. Interest rates on loans are experiencing upward pressure from hikes in the federal funds rate, which currently sits in a range of 5.25% and 5.50%.

Small and regional banks hold a disproportionate number of American commercial real estate loans, putting them at risk if developers are unable to pay their debts. Regional bank New York Community Bancorp stock reached a 27-year low over concern about its exposure to commercial real estate loans, according to Bloomberg.

This story originally was published by the Daily Caller News Foundation.

Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact [email protected].

SUPPORT TRUTHFUL JOURNALISM. MAKE A DONATION TO THE NONPROFIT WND NEWS CENTER. THANK YOU!

Leave a Comment