In China’s depressed real estate market, desperate developers are accepting wheat and garlic as down payments on rural properties to boost sales.
The alternative payment method comes as analysts expect property sales in China to have fallen 25% from January to June amid China’s zero-Covid strategy, according to Reuters.
Chinese citizens are also shying away from real estate investments, preferring to hoard money in China’s uncertain economic climate, Bloomberg reported in May.
To boost sales, developer Central China Real Estate is offering a “wheat-for-house exchange” promotion for homes in Minquan County, Henan Province, CNN reported, citing a now-removed ad on the company’s official WeChat account. At 2 yuan or $0.30 for each cat (21 ounces), buyers can pay up to 160,000 yuan or $23,900 of their
with wheat. House prices in the complex range from RMB 600,000 to RMB 900,000.
The promotion will end on July 10 and is aimed at farmers in the region, a Central China Real Estate agent told Business Standard.
The company is no stranger to launching marketing campaigns aimed at farmers. At the start of China’s garlic season in May, the company accepted garlic as payment for another project in Henan province, according to the development’s official Wechat account.
“On the occasion of the new garlic season, the company has made a firm decision to benefit the farmers who produce garlic in Qi County,” the company wrote in the WeChat post. “We help farmers with love and make it easy for them to buy homes,” he adds.
Central China Real Estate fell 40.4% in net profit in 2021, according to the firm’s 2021 annual investor relations report. The company did not immediately respond to Insider’s request for comment.
The marketing strategy is not limited to one developer: two other developers in the eastern Chinese cities of Nanjing and Wuxi have been accepting watermelons and peaches from farmers, according to state media China News Weekly.
The bankruptcy of Chinese real estate developers has renewed fears of contagion in financial markets
Gloomy buyer sentiment is exacerbating stress on Chinese property firms, with another major property developer defaulting on debt. On Sunday, Shimao Group said it had missed interest and principal payments on $1 billion of offshore bonds due the same day.
“Due to significant changes in the macro environment of China’s property sector from the second half of 2021 and the impact of COVID-19, the Group has experienced a noticeable decline in its contracted sales in recent months,” Shimao wrote in a Hong Kong stock exchange filing. Sales collapsed by 72% in value in the first five months of 2022 compared to the same period in 2021, contributing to
crisis, Shimao added.
Other Chinese developers who have also defaulted on their December 2021 dollar bonds include Evergrande, Kaisa Group and Sunac China. The liquidity crisis began after Beijing cracked down on excessive borrowing by property developers.
Evergrande was the first major Chinese real estate developer to default. That spread to other companies as banks tightened lending across the sector, raising fears of a domino effect on China’s financial sector – and the rest of the world.
The Chinese government has stepped in to contain Evergrande’s crisis, but with more Chinese real estate firms insolvent recently, fears of contagion have resurfaced among investors. Dutch bank ING expects more developer bond defaults in the second half of 2022 and into 2023, Iris Pang, its chief economist for Greater China, wrote last week.
This is despite home sales picking up recently after Beijing pledged to support the property market in March. Property sales in China fell 31.8 percent year-on-year in May, an improvement from a 39 percent drop in April, according to Reuters calculations using official statistics.
“While this is a positive move for home sales, it is not positive for property developers who have defaulted on their bonds, whether onshore or overseas, as potential home buyers will stay away from the homes being sold by these developers to avoid non-completion risk and post-sale property management risk,” Pang wrote.
“As developer debt stress is expected to continue, authorities are likely to continue to focus on increasing home sales to stabilize conditions through the end of the year rather than resorting to developer bailouts,” analysts at Eurasia Group wrote. venture consultancy, in a June 24 note.