BEIJING: Chinese housing developer Vanke announced significant first-half losses on Friday, as local real estate firms contend with an industry-wide crisis compounded by declining home sales in a sluggish economy. Vanke was the second-largest developer in China last year in terms of sales, according to specialist firm CRIC.

The company reported net losses of 9.9 billion yuan ($1.4 billion) in the first half of the year ending June 30, according to a filing to the Hong Kong stock exchange on Friday. The amount was higher than estimates made by the group last month, which predicted a net loss of between 7 and 9 billion yuan.

“It will take time for the recovery of residents’ confidence in purchasing houses,” the company said in the filing. Vanke recorded a net profit of 9.9 billion yuan during the same period in 2023 despite facing economic headwinds.

The company is part-owned by the city government of Shenzhen in southern China — once seen as a guarantee of its solidity. China’s real estate market is grappling with unprecedented challenges, with some developers on the verge of bankruptcy and lower property prices deterring consumers from making investments against a backdrop of a slowing economy.

Rating agency Moody’s once again downgraded Vanke’s credit rating by one notch this month to B1, signifying it was “highly speculative”. The setbacks make Vanke the latest Chinese developer to be caught up in a mounting crisis within the real estate sector, following Evergrande and Country Garden.

The industry, which experienced two decades of meteoric growth as living standards rose across China, had long accounted for more than a quarter of the country’s GDP. In a bid to revive activity, authorities have introduced various incentive measures and made announcements of state support. But those efforts have so far had little impact on the ailing sector. Major cities in China saw another drop in real estate prices in July, indicating demand is still weak. — AFP