Cash-strapped Chinese developers are borrowing a record amount in the offshore loan market this year, adding to the highest debt loads since 2005.
Homebuilders in the world’s second-largest economy got $5.9 billion from foreign banks, up 39 percent from the same period last year, according to data compiled by Bloomberg. Builder debt has soared to 128 percent of equity, the highest since 2005, according to a Bloomberg Intelligence gauge of 84 companies. New home prices fell in July in almost all cities the government tracks and developers are missing sales targets.
“Higher leverage on the balance sheet will give developers a higher financial burden,” said Agnes Wong, credit strategist at Nomura Holdings Inc. in Hong Kong. “That means that if presales are not going as quick as they expect it can translate into trouble more easily than before.”