China’s real estate crisis leaves Country Garden with unpaid workers and quiet sites

TIANJIN, China, Aug 23 (Reuters) – In an unfinished rural garden (2007.HK) At a residential complex on the outskirts of the northern Chinese metropolis of Tianjin, construction has slowed to a dull hum and a few idle workers wander a nearly empty site.

“We haven’t been paid since Chinese New Year (in January). We are all worried,” said a worker surnamed Wang, 50, who said he had stopped working at the Yunhe Shangyuan site last week.

The sprawling complex is one of two projects Reuters visited on Friday in Tianjin, a port city of 14 million people about 135 kilometers (84 miles) southeast of Beijing. Both sites are run by Country Garden, China’s largest developer by sales volume earlier this year, now mired in a debt crisis that threatens to spill over into the broader economy.

Construction had come to a complete or partial halt at both sites: the larger one with a few rows of unfinished five-story apartment blocks, the other with lifeless cranes and thick green scaffolding hanging over skeletal skyscrapers. The workers in the dormitories of the works complained of months without pay.

“I’m under a lot of pressure,” said a Yunhe Shangyuan site worker surnamed Wei, also in his 50s, adding that he had only received a one-time living stipend of 4,500 yuan ($618) so far this year. .

“I have a wife and a son who is about to go back to school, as well as elderly parents… The workers cannot live on this.”

Country Garden, once considered one of the most financially sound developers, is now a beacon of how the cycle has changed for developers.

Its financial problems have come on top of the debt crisis in China’s real estate sector, which accounts for about a quarter of the world’s second-largest economy, and which is currently losing steam amid a housing crisis. depression and weak consumer spending.

A representative of Country Garden’s Yunhe Shangyuan project said in a Wechat statement that all of its “registered employees” were receiving their pay.

At the Yunjing Huating site, the government ordered construction to be halted in June to address management issues, a project representative told Reuters in a separate statement. It has since passed inspection and work is expected to resume next week, the person said, adding that the suspension would have no impact on the expected completion date of October 2024.

Some workers are not employed directly by the developer, the Yunjing Huating representative said, but by its contractor, which “has promised to pay the workers’ salaries before the end of this month.”

The project’s contractor, Shenyang Tengyue Construction, did not return calls from Reuters or reply to emails seeking comment.

The Housing Ministry did not comment on Reuters inquiries about a construction halt in the real estate sector in general or Country Garden in particular.

UNFINISHED HOUSES

Country Garden has nearly 1 million homes to go, according to estimates by Japanese investment bank Nomura. It has not publicly acknowledged whether any of its projects have halted construction due to financial constraints.

In an Aug. 10 exchange filing, Country Garden said it would “spare no effort to ensure delivery” of apartments and would “guarantee the operation of projects across the country” to meet its commitment to homebuyers.

Country Garden built its success by quickly selling a large number of units at low margins and promising “five star life” in smaller, less popular cities.

Tianjin has about a dozen Country Garden projects, most of them completed and delivered, said Gao Fei, investment advisory manager at Centaline Property Agency’s Tianjin branch.

Gao said stalled construction projects were “relatively rare” in the city, representing about a dozen of 300 sites for sale, but “there are indeed projects whose development progress has slowed down.”

“In China, it is a common phenomenon because now all developers control the pace of construction based on the rate of sales… so once sales slow down, so will construction,” Gao told Reuters.

Confidence in the sector took a big hit last year after many Chinese homebuyers threatened to default on mortgages, as developers stopped building pre-sold housing projects due to tight liquidity and strict COVID-19 restrictions.

China’s property market recovered slightly in the first quarter of 2023, but transaction volumes have since declined and most city property markets remain in a “depressed” state, Gao said.

“We’ve seen many homebuyers impacted by a lack of income, and in turn, their homebuying options and what they can afford have been impacted.”

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