Warning sign :: Chinese property developers borrow at record pace

Global investors are lending money to Chinese property developers in record amounts this year, in spite of a deteriorating housing market and warnings from rating agencies over the state of the sector.

Offshore bond issuance from mainland property companies is on track for a record year, with $18bn of debt sold year to date, according to Dealogic – fast approaching the $19.5bn total for all of 2013. The year’s biggest deal came in July, when Sino-Ocean Land borrowed $1.2bn in the dollar bond market.

The rise in offshore borrowing has coincided with tighter credit conditions within China that have forced developers to look overseas for funding.

Beijing has been trying to reduce leverage in the domestic economy following a period of rapid credit expansion. As a result, banks have cut back on lending to certain sectors and the growth of alternative funding channels such as trust loans has slowed.

Falling housing sales have also hit the most important cash generator for developers. Sales have dropped 8.2 per cent so far this year by value, while price cuts introduced to entice buyers have dented margins.

Read more here : http://on.ft.com/1rc70Ey via @FT

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