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China Home Sales Drought Persists With Little Recovery Sign

(Bloomberg) — China’s home sales slump dragged on in March, signaling a much-hoped turnaround for the sector isn’t in sight yet.

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The value of new home sales from the 100 biggest real estate companies slid about 46% from a year earlier to 358 billion yuan ($49.6 billion), following a 60% decline in February, according to preliminary data from China Real Estate Information Corp.

China’s protracted property sales drought has weighed on many of the nation’s biggest builders and eroded the balance sheets of the largest state-owned banks as their bad loans swell. Beijing has tasked banks with helping pump up the domestic economy as well as supporting debt-laden developers.

Country Garden Holdings Co., once a powerhouse in the residential space, made a surprise announcement late Thursday that it will miss a deadline for reporting annual results. China Vanke Co., at one time the largest listed developer, said net income tumbled 46% last year, sliding more than analysts expected.

March is traditionally a quick period for home sales, surging 93% from February, but sales were still weaker than the monthly average in the third and fourth quarters of last year, according to CRIC.

The agency cautioned that the housing market isn’t likely to warm up soon, which will maintain pressure on developers’ contract sales. CRIC forecasts April’s sales to stay unchanged or increase slightly from March.

An index tracking major developer shares listed on the mainland rose as much as 1.6% on Monday morning. The Hong Kong stock exchange is closed for a holiday.

Property market weakness has prompted Fitch Ratings to downgrade the credit rating of some builders into junk territory, including Vanke and Longfor Group Holdings Ltd.

Fitch Ratings on Thursday also cut forecasts for the housing market, and now expects a 5%-10% fall in new home sales this year amid weaker home-buying demand. The ratings firm previously estimated a 0%-5% decline.

(Updates with market reaction in the seventh paragraph.)

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