As the debt risk of Hengda Group (Hongda), a leading real estate developer in China, grows, interest is growing in the impact that Chinese capital will have on Korea, which has had a lot of inflows into the real estate market. This is because investors who have invested in Hengda pre-sale apartments and high-yield guarantee funds are likely to dispose of their real estate assets such as apartments invested in Korea if they face financial difficulties and default after Hengda’s bankruptcy.
Although there is a view that the Chinese government will not stand by Hengda’s bankruptcy, experts point out that the basic task of understanding China’s domestic housing ownership needs to be clarified right away.
◇ Hengda Group failed to block offshore bonds… ‘Financial trouble’ imminent for Chinese investors in 335 trillion bonds
According to foreign media reports such as CNBC and Bloomberg on the 26th, it was reported that Hengda Group had to pay $83.5 million in interest on the $2 billion in offshore bonds maturing in September 2025 on the 23rd, but it was not paid until the 24th. It has to pay $47.5 million in interest on a monthly bond. In addition, if the interest on the $305 billion is not repaid within 30 days of the due date, it must declare default on the offshore bond. However, Hengda’s self-defense measures are not well-known at present. It is evaluated that expectations for a debt settlement of 335 trillion won have disappeared as the prospect that the current situation will be neglected after the Chinese government has issued guidelines to local governments to prepare for Hengda bankruptcy.
The key to the domestic real estate market is the direction of the 1.2 million people who have invested in apartments pre-sold by Hengda, as well as millions of investors who have invested in wealth management products with interest rates as low as 8%. If Hengda goes bankrupt, there is no way to recover the investment funds they have invested in debt, so there is a possibility that they will sell other investment assets to make up for it.
An official from the National Assembly analyzed, “The inflow of Chinese capital from the domestic real estate market, centering on Seoul, has increased significantly over the past decade. .
According to People’s Strength Rep. Hong Seok-jun, the number of land owned by Chinese (including corporations) in Korea increased from 3515 cases in 2011 and 3,695,166 m2 (approved land value of 765.2 billion won) to 57,292 cases in 2020, and 1,995,837 m2 (approved land price of 2.826.6 trillion won). increased significantly to In 10 years, the lot increased by 16.3 times, the area by 5.4 times, and the official land price by 3.7 times. During the same period, the proportion of Chinese in foreign land based on lots increased nearly sevenfold from 4.91% to 36.37%.
The problem is when Hengda investors, whose debt maturity is imminent, sell domestic real estate at once.
◇ Domestic land owned by Chinese has increased by 16.3 times in 10 years… Official land price only ‘2.8 trillion’
For example, the land owned by Chinese in Seoul reached 273,000 square meters as of the end of last year. The industry believes that if you own land in Seoul, where there is almost no vacant land, it is highly likely that it is a common land for apartments, houses, or buildings. Expanding this to Gyeonggi (4903,000㎡) and Incheon (214,000㎡) means that 539,000㎡ of land, houses and apartments owned by Chinese throughout the metropolitan area are on the short-term sale list following the bankruptcy of Hengda.
Ham Young-jin, head of Big Data Lab, said, “Short-term surges and sharp declines in the real estate market, such as apartment prices, not only increase financial burden on all market participants, but are also a risk factor that harms market stability. In a situation where the price of the company is leading the increase, there is a possibility that the price may exceed the stabilization level if a large-scale rapid sale proceeds.”
In addition, the US Federal Reserve recently formalized the imminent taper (reduction of asset purchases) and hinted at a key rate hike early next year. There is also the prospect of it being possible.
Some observers point out that the bigger problem is that the government does not clearly manage the status of foreigners’ housing ownership in spite of these risks, so that the public cannot grasp the status of their own.
Song Seok-jun, a member of the National Assembly’s Land, Infrastructure and Transport Committee, said, “Amidst the sharp rise in apartment prices in Seoul under the Moon Jae-in administration, the rate of increase in apartments purchased by foreigners has been particularly steep over the past two to three years. It is owned by foreigners and foreign corporations, and I cannot understand the government’s attitude to make it impossible to easily determine the status of home ownership by nationality.”
(Seoul = News 1)
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