Fitch: China's Property Developers Will Continue to Struggle with Declining New Home Sales in 2025

Fitch Ratings stated that Chinese property builders will continue to struggle with declining new home sales in 2025. Financial flexibility remains the most important rating factor for most rated home builders, as home sales, the main source of liquidity for real estate developers, are expected to continue to decline by 15%.

The disparity in funding conditions between state-owned enterprise (SOE) developers and privately owned enterprise (POE) developers is also likely to persist, with SOE developers largely retaining access to onshore bonds. Some POE developers, such as Longfor Group Holdings Limited (BB/Negative), have been able to replace their unsecured borrowings with secured loans backed by investment property portfolios.

On the other hand, the financial structure is a moderately important factor for most rated home builders, as they have adjusted their investment plans to reduce land banking activities and protect cash. Currently, half of our rated issuers in China's home construction sector have a Negative rating outlook. This reflects the sales risk for these companies and indicates that, despite government support, the sector may not stabilize.