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Announcement:

Moody's: China property outlook stable; sales growth to slow

 The document has been translated in other languages

Global Credit Research - 08 May 2013

Hong Kong, May 08, 2013 -- Moody's Investors Service says that the outlook for China's property market remains stable, but sales growth will slow.

Those developers focused on the mass-market will enjoy the strongest level of sales. They include China Overseas Land & Investment Limited (Baa1 stable), China Vanke Co., Ltd. (Baa2 stable), Longfor Properties Company Limited (Ba1 stable), Country Garden Holdings Company Limited (Ba3 positive) and Shimao Property Holdings Limited (Ba3 stable).

"Moody's stable outlook reflects our expectation for around 10% year-on-year growth in the value of residential property sales over the next 12 months, in line with the average seen in 2012, but down from the high levels seen during January-March 2013," says Kaven Tsang, a Moody's Vice President.

"Our view is that urbanization and favorable mortgage financing for first-time home buyers will continue to support demand and sales volume, while new guidelines issued by the central government in February to further clamp down on investment demand will slow price increases," says Tsang.

Tsang was speaking on the release of Moody's latest Chinese property market outlook, titled "Property Developers' Sales Growth Will Slow Amid Housing-Market Controls."

Other themes covered by the report include the consideration that the guidelines will not dampen overall sales volumes because many developers have shifted their focus to mass-market housing, which addresses home-owner demand and is not the target of the government's policies.

Accordingly, those developers with large inventories of luxury properties -- which are subject to policy controls -- will see weak sales growth, says the report. These companies, which include Yanlord Land Group Limited (Ba3 stable), Zhong An Real Estate Limited (B2 negative) and SPG Land (Holdings) Limited (B3 negative), will need time and new funding to reposition their product strategy.

"With stocks overall, Moody's expects that the rated developers will keep their work-in-progress inventory at reasonable levels -- around two to two and a half times revenue -- as they continue to expand cautiously," says Franco Leung, a Moody's Assistant Vice President, adding "Through the down-cycles in 2008 and 2011-2012, they learned to allocate capital only to projects that have good track records of contract sales."

The report also said that liquidity remains adequate for most rated developers. Improved inventory management, continued access to offshore bond markets, and stable sales growth will help most rated developers maintain adequate liquidity during the outlook period.

However, a few low-rated developers, will still need to address refinancing of their large proportion of short-term debt since their sales are not strong.

Looking ahead, Moody's is unlikely to change the industry outlook to positive over the next 12 months because it believes the central government will not relax its restrictions on home purchases due to the risk of a run-up in prices.

On the other hand, Moody's would consider changing the outlook back to negative if the government imposed additional restrictions that we believe would cause year-over-year property sales to fall 10%-15% for six months.

Subscribers can access the report at http://www.moodys.com/research/China-Property-Industry-Property-Developers-Sales-Growth-Will-Slow-Amid--PBC_153619

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: London +44-20-7772-5456, New York +1-212-553-0376, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Franco Leung
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: China property outlook stable; sales growth to slow
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