SHANGHAI—Chinese housing-market uncertainties that contributed to a closely watched bond default appear to be spreading, as authorities in one city froze transactions related to multiple developers’ properties and a second moved to freeze a troubled company’s apartments.
It wasn’t clear whether the moves were related, and authorities in one city cautioned the public against reading too much into the moves. But the lack of details has spooked investors and added to worries over a property market more broadly hit by a sales slump and slowing economic growth.
In the eastern city of Hangzhou, authorities froze nearly all of the apartments in a 749-unit project called Xixi Puyuan built by Kaisa Group Holdings, according to local property portal Touming Soufang.
The reason for the move wasn’t clear, and it also wasn’t clear whether other companies were affected.
A Kaisa spokesman declined to comment, and Hangzhou authorities didn’t respond to requests for comment. In China, local authorities have broad authority to block properties from being sold or transferred for a variety of reasons.
The move came after Kaisa missed $US23 million in interest payments due last week on its offshore bonds and defaulted, putting a focus on the company and the rights of investors to recoup losses.
The default also led to more than 20 Chinese companies to ask a court in Kasia’s hometown, the city of Shenzhen, to freeze the company’s assets. Its projects in Shenzhen were blocked by the government late last year, and some senior executives have left the company.
Financial services firm Shanghai AJ Corp.’s trust unit said it has applied to a court in Shanghai to freeze the deposits and other assets of Kaisa’s Hangzhou unit. “We’re now waiting for the court to process our petition,” said a spokeswoman from the financial firm, who declined to give further details. The basis of the company’s claim against Kaisa wasn’t clear.
Meanwhile, authorities in Shenzhen blocked transactions related to thousands of properties owned by a number of Chinese property companies, including China Overseas Land Investment Ltd. and China Merchants Land Ltd. Authorities didn’t give a reason, and it wasn’t clear whether the move was connected to Kaisa.
State-run China Overseas, which saw more than 2,000 units in an affordable housing project blocked, said the apartments had already been sold and that the temporary suspension was due to a normal administrative measure, not any wrongdoing on its part.
The project, called Yuejing Garden, is in the same district where Kaisa projects were earlier blocked. China Merchants Land didn’t respond to a request for comment.
China Overseas shares fell 2.8 per cent to HK$24.55 in Hong Kong on Friday, while China Merchants Land fell 5.1 per cent to HK$1.11. A Hong Kong index of real-estate stocks listed on the mainland was down 0.6 per cent compared with a broader market gain of 0.9 per cent, according to FactSet.
In a statement on its Weibo social-media account on Friday, Shenzhen’s Urban Planning Land and Resources Commission said it occasionally blocks sales of apartments to help judicial authorities, but also to manage affordable-housing projects and to make the market more orderly.
“Authorities could also temporarily lock up the relevant properties and unlock them after those issues are resolved,” it said, adding “we suggest no ‘overreading,’ in order to maintain a good market environment.” It didn’t disclose details or name specific companies.
The freezes have worried buyers and potential buyers in those developments. “When I spoke to sales staff, they were unsure if they could even get their salaries this month,” said a home buyer surnamed Zhou, whose family bought two homes in Kaisa’s Yufeng project, which is still under construction. “How can I be confident that Kaisa will complete the construction of my home?”
Shenzhen-based lawyer Zhang Xiang said the apparently arbitrary nature of the freezes has given the investment community jitters. “It’s very rare for thousands of properties from a single developer being locked up by authorities at once,” he said, adding that the reasons could range from a legal dispute to official scrutiny to other matters.
The freezes come as China’s broader housing market deals with a slowdown amid high inventories of unsold homes in many cities. Year over year, average new-home prices fell about 2.7 per cent in December, according to data provider China Real Estate Index System. But the problems haven’t hit more affluent cities like Shenzhen as hard.