(Yicai) Sept. 6 -- China’s troubled real estate sector has not yet reached a turning point as severe debt issues persist, according to analysts, even though the shares of most listed developers have soared on the back of recent government support policies.

China Evergrande Group [HKG: 3333] surged 66 percent today to close at HKD0.58 (7 US cents) a share, while Shimao Group Holdings [HKG: 0813] jumped 41 percent to HKD1.14 (15 US cents) and Country Garden Holdings [HKG: 2007] rose 19 percent to HKD1.20. Most other Hong Kong-listed builders also gained today.

Sales are expected to recover a little as local authorities and the central government have come out with favorable policies of late, Tao Shuru, corporate research director at China Index Academy, told Yicai. Without these policies, builders could not return to profitability, Tao noted.

The key factor hindering the market’s recovery is a lack of confidence, said Wang Xingping, an analyst at Fitch Bohua. The recent support policies and other stimulus measures are likely to boost confidence in the economy and this will help the real estate industry to gradually stabilize, Wang noted, adding that rising financial costs will delay the return to profit.

Considering the lengthy settlement cycle for builders, some will turn from profit to loss in 2025 or early 2026, said Zhang Hongwei, founder of consultants Jingjian. Some firms that have invested heavily in third- and fourth-tier cities may even be forced out of business, he added.

The asset-to-liability ratio and liquidity conditions have worsened for listed developers, according to financial data from Wind. Between 2020 and the first half of this year, the overall net debt ratio of Chinese mainland-listed builders rose to 82.6 percent from 66.8 percent. China Fortune Land Development, Sunac China Holdings and 51 other firms listed on the mainland or Hong Kong markets had a liability ratio of over 100 percent.

Some 72 publicly traded developers had losses, with Country Garden, Evergrande, Sunac, and Sino-Ocean Group Holding each posting losses in excess of CNY10 billion (USD1.4 billion), according to their first-half earnings reports.

Property developers still face heavy debt pressures and difficulties in making money, prompting Beijing, Shanghai, and other major cities to ease policies limiting property purchases and sales recently.

Editors: Zhang Yushuo, Tom Litting