As weakening sales force Chinese developers to cut prices and turn to costlier funding sources, these same developers face an “increasingly severe credit outlook,” warned Standard & Poor analysts this week. In fact, many developers are nearing a serious “liquidity squeeze” that might allow most to absorb the projected 10 percent drop in sales next year, but that probably will take out many of them if things continue[1]. “The worst is not over for China’s real estate developers,” wrote S&P analyst Frank Lu yesterday, adding that he forecasts “slower sales and lower property prices ahead.”

Many analysts believe that the deflation of China’s real estate bubble has probably already started as inventories continue to rise while sales slow[2]. Do you think that the S&P’s warnings are on target?

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[1] http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/09/27/bloomberg_articlesLS68CQ1A1I4H.DTL

[2] http://www.businessinsider.com/sp-raises-more-concerns-on-chinese-real-estate-developers-2011-9