As the momentum of supportive policies continues to loosen and diversified financing tools emerge, the year 2024 is not showing signs of recovery in the non-bank financing scale of real estate companiesRecent data from various market institutions points toward a continued downward trend in financing activities.
Reports have emerged from multiple financial organizations indicating that the size of non-bank financing for real estate companies is expected to fall year-on-year in 2024, with a widening decrease compared to the previous yearSimultaneously, the costs associated with financing have seen a notable drop, with interest rates across various channels falling below 3%. This development underscores a significant shift in the financing landscape within the real estate sector.
Since 2021, the scale of non-bank financing among real estate companies has been on a decline for four consecutive years
The inability to roll over debts periodically indicates a growing burden of debt on these companiesProjections suggest that the debt repayment amounts due by 2025 are set to increase again, leaving the market still grappling with substantial challenges.
It is essential to recognize that the real estate sector is generally characterized by cyclical trends that can impact financing dynamics heavilyDespite a prevailing governmental tone advocating stabilization in the real estate market as of 2024, financing policies appear to remain looseHowever, these policies tend to favor white-listed projects and the revitalization of existing land assets, which has not resulted in a halt to the decline in non-bank financing volumes.
According to analysts at the China Index Academy, the total bond financing achieved by the real estate sector in 2024 is projected to reach approximately 565.31 billion yuan, reflecting an 18.4% decrease compared to previous years, and illustrating an even more pronounced downturn than experienced last year
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In particular, corporate credit bonds have suffered an 18.5% drop, overseas bonds plummeted by 69.5%, and asset-backed securities (ABS) have been reduced by 13.6%.
Further analysis by CRIC shows a stark contrast when observing the financing situation across 65 typical real estate companiesTheir total financing volume for 2024 is expected to reach 462.9 billion yuan—a stark year-on-year decrease of 31%, nearly mirroring the increasingly severe 2022 figures, and marking a drastic expansion from the 14% decrease observed in 2023. Remarkably, the third quarter of 2024 has the highest financing volume, amounting to 147.3 billion yuan, although still indicative of a 6% decline year-on-year, with the other quarters reflecting a decline exceeding 30%.
Since the second half of 2021, there has been a marked retreat in the financing scale of the real estate industry, leading to a fourth consecutive year of decrease
Specifically, data from CRIC illustrates that the drops in financing scale over the past four years have been reported at rates of 16%, 36%, 14%, and finally 31% in 2024.
Examining the funding structures, the international debt financing scale for real estate companies is continuing its decline from an already low base in 2024, where credit bonds still play a predominant role in real estate financing with an uptick seen in the issuance of ABSFurthermore, data from the China Index Academy reflects that credit bond issuance in 2024 is projected to reach approximately 344.85 billion yuan—a drop of 18.5%, representing about 61% of total financingThis figure remains largely unchanged from the previous yearNotably, state-owned and local government enterprises dominate credit bond issuance, accounting for over 90%—an increase of 2.5 percentage points from last year—while private and mixed-ownership enterprises have seen a reduced market share
Despite this, the issuance period for mixed ownership and private property developers’ credit bonds has been extended, indicating a preference for longer-term borrowing.
On the other hand, the ABS financing scale for real estate companies has been projected at approximately 213.76 billion yuan in 2024, a year-on-year decrease of 13.6%, though it still represents 37.8% of the total financing scale, up 2.1 percentage points from the previous yearAdditionally, the average issuance term for ABS financing in 2024 stands at about 9.85 years, denoting a significant extension in maturity as companies adjust to market conditions.
By the end of 2024, there may be a slight warming in the financing environment, as costs for real estate financing continue to decline across various channels, with rates largely falling below the 3% threshold.
According to analyses, the average interest rate on bonds in the real estate sector for 2024 is anticipated to be around 2.95%, which translates to a year-on-year decrease of 0.72 percentage points
These shifts are attributed to factors such as the series of interest rate cuts initiated in 2024 and changes in the structure of financing enterprises and products.
Noteworthy is the fact that the average interest rate for credit bonds dropped to 2.86%, down by 0.71 percentage points year-on-year, while overseas bond rates average around 5.22%, reflecting a decline of 1.17 percentage pointsThe average rate for ABS also fell to 3.01%, down 0.59 percentage points.
The downward trajectory in financing costs is evident in actual figures provided by CRIC, which report that financing costs for offshore bonds have dropped to approximately 4.18%, nearly half of the 8.04% rate in 2023. Similarly, onshore bond financing costs now average around 2.92%, a decrease of 0.54 percentage points compared to last year.
While financing policies remain lenient into 2024, the current trajectory suggests that bond financing scales might still face a downward pathway