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
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Franco Leung
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
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MD - Corporate Finance
Corporate Finance Group
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Moody's: China property outlook stable; sales growth to slow