DOMESTIC developers face higher financing costs after regulators stepped up efforts to rein in the borrowing that has fueled a red-hot property market.

    The Shanghai and Shenzhen stock exchanges have raised the threshold for property firms to sell the bonds that the two exchanges regulate, domestic media reported yesterday.

    Along with curbs on home sales and mortgages, the rules will likely strain access to cash and prompt more builders to seek money overseas, pushing up dollar note yields, according to Australia & New Zealand Banking Group Ltd. and Bank of China Hong Kong Ltd.

    China’s real estate industry accounts for about a third of economic output, raising the stakes as the government tries to thread the needle in preventing a bubble without prompting broader fallout. The sector accounted for 63 bankruptcies this year, the biggest contributor to 507 restructurings in the nation. Goldman Sachs Group Inc. said Oct. 28 investors should reduce exposure to Chinese investment-grade and high-yield property bonds.

    “I’m quite concerned on Chinese property,” said Jenny Zeng, Hong Kong-based portfolio manager and head of credit research for Asia fixed income at AllianceBernstein. “For Chinese developers, we are underweight as sales will slow down and margins will be further squeezed.”

    While developers can still raise cash in the dollar bond market at near record lows, the financing costs have already been inching up in recent months as authorities’ determination to cool the real estate market becomes clearer.

    Average yields on dollar bonds from Chinese developers and other Asian high-yield issuers have risen 15 basis points this month to a four-month high of 6.6 percent, after dropping to a record low in September.

    The jump in dollar bond yields comes at a bad time for many Chinese developers. They sold US$6 billion in offshore notes in the third quarter, the highest since 2014, while their onshore offerings slumped to the lowest in five quarters. (SD-Agencies)