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South China Morning Post
05-03-2025
- Business
- South China Morning Post
Chinese developer Longfor's bonds sink deeper into junk territory as home sales sputter
Beijing-based Longfor Group is the latest firm to see its bonds downgraded further into junk territory, as weakening sales plague China's beleaguered property developers despite the central government's recent support measures to revive confidence. Advertisement S&P Global Ratings on Wednesday downgraded Longfor's long-term issuer credit rating to BB from BB+ and its senior unsecured notes to BB- from BB, citing concerns that the company's contracted sales could remain under pressure through next year due to a further depletion of saleable resources. The company's contracted sales could decline a further 13 per cent this year to 89 billion yuan (US$12.3 billion), the ratings agency said. Longfor's gross profit margin from property development was expected to remain suppressed at 5 to 6 per cent, down from 11 per cent in 2023, as its focus on clearing inventory continued to weigh on profitability, S&P said. 'While we believe the company will be able to reduce adjusted debt of about 10 billion yuan each year in 2025 [and] 2026 using its growing rental and service income, weakness in property development will partially offset this,' wrote S&P analysts Wilson Ling and Edward Chan. The downgrade comes as China's developers continue to struggle with lacklustre sentiment among homebuyers. The property market crisis is now in its fourth year after Beijing introduced measures in late 2020 to deleverage developers and deflate a housing bubble. Advertisement
South China Morning Post
20-02-2025
- Business
- South China Morning Post
Hong Kong landlords should brace for slashed retail rents in 2025: S&P Global
Retail rents in Hong Kong were expected to be hard-hit this year, as landlords were likely to slash prices to maintain occupancy levels, S&P Global Ratings said on Thursday. Major S&P-rated landlords would see 5 to 10 per cent cuts in rent for new leases in 2025, the firm said, adding that the situation could get worse if tenants walk away in spite of the lower prices. 'After 10 consecutive months of retail sales declines since March 2024 in Hong Kong, we believe the city's retail landscape will continue to be challenging this year,' said Wilson Ling, an associate director at S&P. 'Hence, pressure on retail rents could hit hard on landlords.' According to the Census and Statistics Department, retail sales in the city fell every month from March to December 2024. For the year, they declined 7.3 per cent from a year earlier. Ling attributed the drop to competition from mainland Chinese e-commerce platforms, more Hongkongers spending their money across the border, weaker tourist spending and a stronger Hong Kong dollar compared with the yuan. 'The retail weakness situation in Hong Kong is exacerbated by the negative wealth effect of Hong Kong's faltering residential property market,' he said. 'This cyclical factor may not be lifted this year.' Landlords in the city's best malls would offer rent discounts to retain tenants and minimise the damage to their cash flow, Ling said, leading to the 5 to 10 per cent cuts in rent for new leases.
