Categorized | International

Small Developers Facing Big Problems in China

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There is perhaps no group suffering more from the Chinese government’s real estate restrictions than small property developers. Property developers in general have had to resort to extreme measures to generate any kind of income, as home sales and prices continue to be in a freefall of sorts.

Property developers have cut prices by drastic amounts, and others are offering major incentives to attract buyers. While major developers are able to stay afloat despite such extreme measures, there is concern that smaller developers may not be so fortunate. It is becoming more increasingly difficult for small property developers to borrow much needed money, as lenders continue to cut off developers throughout China.

The pending European debt crisis is also taking its toll, as buyers are becoming increasingly hesitant to purchase homes worldwide. With home sales decreasing at alarming rates, many developers have seen their credit ratings plummet. For many smaller property developers, it is simply not feasible to maintain doing business with little to no cash flow. As such, many analysts fear that smaller property developers may soon face failure, creating a lack of competition within the property development industry.

Analysts believe that small property development companies are going to simply close up shop, as there is no possible way for them to compete with the cuts being made by larger property development companies. Homebuyers will likely suffer from such a situation, as the lack of competition will either drive up prices for new homes, or it will create a situation in which homes may not be as solidly built.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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