Credit Risk: Property Industry

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Step 1
Key Warning Signals for public listed property companies:
There are some key warning signals for property companies from the credit perspective. The construction contracts provide the first warning signals. The suppliers, subcontractors, and vendors insert provision that shift the financial risk to the construction companies (k). Another warning sign is that contractors, subcontractors, and suppliers, those that furnish their labor and materials to the property developers reduce trade credit to the construction company. When a construction company enters into joint check agreements and such agreements increase it is warning sign related to credit in the construction industry. An important credit risk in the construction industry is that the company is signing new customers and weakly follows them up for payment, or does not use a robust method of following up for payments(l).
Some other important warning signals in public listed property companies related to credit are regular and large defaults by many customers, negative market information related to the Property Company, and customers avoiding communication with the company's staff. For example, in case of Sun Hung Kai Properties, when in 2008 the company announced that Walter Kwock was leaving for personal reasons with immediate effect, it was important credit risk indicator.. Another important credit risk signal in the public listed property company is the turnover of the staff. The staff of property companies senses the increase in credit risk of the company first. An increase in staff turnover in public ...